Sigh of relief as long gilts sell like hotcakes
ULTRA long-term government bonds flew off the government’s shelves yesterday, assuaging fears about its ability to raise money after its last auction failed in March.
The Debt Management Office (DMO), which auctions the sovereign bonds known as gilts, received £4.6bn of bids for the £2bn of 40-year debt it was offering, triggering its new post-auction facility allowing successful bidders to grab a further 10 per cent of the bonds.
RBS Capital Markets gilt expert John Wraith said: “It’s more a case of breathing a sigh of relief rather than seeing it as a start of a gilt market rally.”
The DMO failed to find buyers for the full £1.75bn of paper it was offering at an auction in March in the first failed auction in seven years.
The failure sparked fears the government was facing a funding crisis and would have trouble persuading investors to take on the record £220bn of gilt issuance now expected to fund its fiscal stimulus ambitions.
Gilt prices remained stable yesterday, as the 40-year gilt auction had been expected to be successful by analysts and attention was firmly focused on the £3.5bn auction of 10-year gilts that takes place today.