UK debt sales hit £430bn as 25-year gilt raises £6.5bn

The United Kingdom Debt Management Office (DMO) announced on Tuesday that the syndicated launch of £6.5 billion (nominal) of 0⅞% Treasury Gilt 2046 was priced at £100.177 per £100 nominal, equating to a gross redemption yield of 0.8671%.

“Proceeds from today’s transaction are expected to amount to approximately £6.5 billion (cash) and will take gilt sale proceeds in the financial year to date to £430.0 billion,” said the DMO.

“The DMO is planning to raise £485.5 billion via gilt sales in 2020-21.

“This was the sixth transaction in the DMO’s 2020-21 syndication programme.

“Today’s offering, a new current coupon bond maturing in 2046, was priced at a yield spread of 2.5 basis points (bp) above the yield on the reference gilt, 3½% Treasury Gilt 2045.

“This represented the tight end of the published price guidance.

“The UK domestic market provided the main support for the issue, taking around 92% of the allocation.

“This transaction saw participation from a large number of diverse high quality investors based both in the UK and internationally.”

DMO CEO Robert Stheeman said: “Once again I am pleased to see another very strong and smoothly executed transaction in our sixth syndication of the financial year.

“Today we have successfully launched a new gilt in the 25-year maturity area.

“This new bond represents another and welcome point in the series of current coupon benchmark gilts which we have been working to build up over time.

“The transaction was well received by the market, with the new gilt attracting very strong interest from our core pension fund and asset manager investor base.

“The size of £6.5 billion, which was larger than originally planned, reflects a very high-quality order book. 

“This has been another very encouraging indication of the strength and depth of the gilt market and the commitment of its participants, which has been fundamental in helping us to deliver this year’s unprecedented financing programme.

“I look forward to this continuing as we move towards the end of this year’s remit and approach the 2021-22 financial year.”

The syndicated offer was managed by four Joint Bookrunners — BNP Paribas, Deutsche Bank, HSBC and Nomura.

“At 9.30am the Joint Bookrunners announced that the total value of orders exceeded £45 billion and that the book was expected to close at 10.00am,” said the DMO.

“At 9.45am the Joint Bookrunners announced that orders exceeded £60 billion, that price guidance was being fixed at a yield spread of 2.5bp above the reference gilt, and that the order book would close at 10.00am.

“The book closed at 10.00am with 152 orders totalling £56.6 billion (nominal) at the final spread.

“At 10.35am the Joint Bookrunners announced that the size of the transaction had been set at £6.5 billion (nominal).

“The price was set at 12.36pm.

“The seventh and final syndication in 2020-21 is planned for the week commencing 8 February 2021 (subject to demand and market conditions) and will be for a new long dated index-linked gilt.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.