The latest auction of bonds or gilts by the UK government failed to meet the required demand for the first time in seven years on Wednesday, in a stark illustration of how brittle investor confidence is in the stability of the UK' public finances and the government's commitment to quantitative easing.

The UK Debt Management Office, which sells gilts to raise money on behalf of the government, said today that it had attracted bids worth only £1.63bn for a tranche of gilts worth £1.75bn (€1.9bn), marking the first time since 1995 that an convention auction has failed to be fully covered, according to analysts.