I'm the Dauphin in France

Chapter 1320 Financial Warfare, Part Three
Although gas streetlights had become a taboo subject in Britain, Pitt Jr., being a top-notch statesman, clearly understood the importance of gaslights to the country's development.

So he planned to have the government allocate secret funds to secretly research the relevant technology, and then start promoting it in a small city.

Henry Pierce finished the rest of his tea and frowned and shook his head again.

It has almost no sweetness.

With sugar prices soaring, even mid- to high-ranking officials like him have to be careful with their sugar intake. As for ordinary people, many have started using cheaper maltose for cooking.

Pierce looked at Nathan, the committee's treasurer sitting opposite him: "There's been good progress on Mr. Tennant's side lately. Next year's funding should increase significantly, right?"

Charles Tennant was the chief technician of the Fuel Committee, responsible for researching the industrial production of coal tar.

The CFO was lost in thought with his head down and did not answer.

Pierce raised his voice: "Mr. Nathan, I'm talking to you."

Nathan suddenly asked out of the blue, "Have you heard about the national debt?"

"Government bonds? What happened?"

Nathan lowered his voice and said, "There are rumors everywhere lately that the government may be unable to repay its national debt because of the unsuccessful war."

Pierce waved his hand dismissively: "How could that be? Austria and Prussia were the ones who lost; we only lost a few soldiers."

“It’s all because of Putin and Obama.” Nathan leaned forward. “It’s said that the government lent them a large loan before, but they have no money to repay it now. So the Bank of England has no money to pay its national debt.”

Because the British were generally optimistic about winning before the war, they would buy government bonds whenever they had spare money.

“You don’t need to pay attention to these rumors. Let’s talk about next year’s budget. We need to get Congressman Egerton to take a smaller share, otherwise everyone will…”

As Pierce was speaking, his attendant hurried over, placed several newspapers smelling of ink beside him, and bowed, saying, "Sir, these are the Times and the Morning Post that have just been delivered."

Because this place is quite far from London, you can only see the day's newspaper during afternoon tea.

Pierce casually flipped through The Times, and the front page featured the Chancellor of the Exchequer stating that there would be no reduction in sugar subsidies.

Nathan, who was sitting across from him, saw a line of text on the second page and suddenly reached out and snatched the newspaper away.

"You can simply ask me for it..."

Nathan turned the newspaper over and interrupted Pierce, saying, "Look at this!"

The latter saw an advertisement where he was pointing: "Selling £20 in UK government bonds, held by the Nassau government, safe and reliable, divisible... 10.2% discount yield."

The coupon rate for UK long-term government bonds is 9.5%. Typically, holders would lower the price to recoup funds after receiving some interest, but these bonds, sold just over a year ago, are now offered at a high discount of 0.7%!

In other words, if it were a 10-year government bond, the Nassau government would have essentially paid back all the previous interest.

This usually only happens when sellers are severely short of funds, but I haven't heard of a financial crisis in Nassau.

Pierce immediately recalled the rumor Nathan had just mentioned, and quickly shook his head, saying, "It should just be a coincidence."

The latter seemed unwilling to continue this issue and instead began discussing the allocation of funds.

However, the next day, Pierce saw news in The Times that the Bavarian royal family and Barings Bank had reached a £16 deal for British government bonds.

If one country selling British bonds is a coincidence, then two countries selling them one after the other inevitably raises questions. For example, did the leaders of these countries sense something amiss with the British bond market?
Pierce quickly handed over the committee's affairs to his assistant, while he and his confidant Nathan headed to London to gather information.

The day after they arrived in London, news broke that Hessian was selling off British bonds for a staggering £30.

When Pierce and Nathan arrived at the Bank of England, the lobby was already packed. Fortunately, they were VIP clients and could use a special passage; otherwise, even getting in would have been difficult.

Soon after, a senior official from the Bank of England clarified that there were no problems with the repayment of government bonds, that the bank had sufficient funds in its books, and that everyone should not worry.

Yes, this is the third time he has repeated these words today.

Pierce asked the bank's broker for more details about the government bonds, and only felt somewhat relieved when he left the bank in the afternoon.

But he was only at ease for a day before he saw in the newspaper that Genoa Union Credit Ratings had downgraded the rating of British government bonds to A2.

For government bonds that are marketed as low-risk, this level is already considered "not recommended for purchase".

Then Bavaria announced its second large-scale sale of government bonds.

The entire UK government bond market was immediately thrown into a state of panic.

……

10 Downing Street.

Pete frowned as he looked at the report on the table and said in a deep voice, "It's obvious that someone is trying to short our Treasury bonds."

After Henry Petty left the Grenville cabinet, Pitt Jr. did not appoint a new Second Chancellor of the Exchequer, but instead managed the finances himself.

Indeed, following a major war in Europe, Britain's financial situation became extremely dire.

Sir John Watkins, Governor of the Bank of England, nodded and said, "These German countries are mostly under pressure from the French. There is no chaos in the government bond market at the moment, but such a large sell-off at once will seriously affect our new bond issuance."

These government bonds being sold off have short maturities and are heavily discounted, so those interested in buying government bonds will definitely prioritize them.

Peter hesitated for a moment, then gritted his teeth and said, "Have Barings Bank, Styles, and other major securities brokers buy up all the sell-offs, and the Treasury will inject funds into them."

Sir Watkins' eyelids twitched, and he hesitated before saying, "Your Excellency, the total amount is now close to one million pounds... Perhaps we can use some 'technical means' to halt their sell-off."

“No, market confidence is more important than anything else,” Pete Jr. said decisively. “As long as the sell-off ends, new bond issuance can make up for it.”

After Watkins left, Pitt Jr. immediately began drafting a proposal to issue one million pounds more banknotes for a vote in the House of Representatives.

However, to his surprise, this was only the beginning.

In the following month, 18 German states participated in the sale of British bonds, totaling nearly £220 million.

Worst of all, £70 of the properties failed to find buyers, prompting Württemberg to offer a discount of 1.1%.

This means that newly issued long-term UK government bonds must have an interest rate of over 10.6% to be able to be sold.

What even Peter Jr. didn't notice was that the impact of fluctuations in government bond interest rates had begun to spread to bank deposit and loan rates.

(End of this chapter)