UK DEBT MANAGEMENT OFFICE SAYS GETS 2.08 COVER AT 2 BLN STG SALE OF 4.5 PCT SEPT 2034 GILT
UK DMO GETS 0.3 BASIS POINT YIELD TAIL AT SEPT 2034 GILT AUCTION
UK DMO GETS 5 TICK PRICE TAIL AT SEPT 2034 GILT AUCTION
The results, via Reuters, of the first gilt auction since the Bank of England’s decision to put Quantitative Easing on hold. (For the full release from the DMO go here).
All in all something of a mixed bag, but then this was a modest auction and this gilt lies in something of a ‘no-man’s land’ for fund managers, according to Marc Ostwald of Monument Securities.
In terms of today’s 4.5% 2034 auction stock, the sale volume at £2.0 Bln is modest, and the stock as can be seen from the attached Yield Curve chart lies at the very peak of the curve, and has indeed been underperformed its peers. It is however about 0.6 of a year short of the benchmark FT-A over 15-yr Gilts duration index, and as such in ‘no man’s land’ for some fund managers, particularly with the syndicated re-opening of the ultra-long 2060 Gilt looming between the 17 and 25 February, which fills what was otherwise a rather modest volume of long-dated auctions ahead of the key March 7 coupon date. So, a further concession may be needed if a rather ragged result is to be avoided.
In fact, since the MPC decision to pause QE last week, UK gilts have risen only slightly. However, this disguises a sharp underperformance relative to many of its G7 peers, according to Ostwald.
A selection of 10-year government paper.
Which tells us that amid the recent flight to safety, gilts have missed out.
And they are also lower this morning, no doubt unsettled by the latest Populus opinion poll, which showed support for the Labour party up 2 percentage points to 30 per cent and increases the possibility of a hung parliament.
Related link:
Gilt auction Wednesday – FT Alphaville