Bloomberg News

Gilt Demand Robust, Issuance to Fall Gradually, Stheeman Says

September 29, 2011

Sept. 29 (Bloomberg) -- U.K. government bond auctions are showing “strength” in demand as investors seek safety amid the euro-area debt crisis, according to the nation’s debt chief Robert Stheeman.

Investors bid for about twice the amount sold when Britain auctioned 4.5 billion pounds ($7.05 billion) of bonds maturing in 2052 on Sept. 27. Banks obliged to participate bought all the 5 billion euros ($6.8 billion) of five-year notes Germany sold yesterday as other investors didn’t enter a single bid, according to six people with the knowledge of the sale.

“The result shows enduring strength of our investor base, and it’s perhaps also a result of a general flight to safety,” Stheeman said in an interview in London. “Gilts are viewed as part of the safe-haven world in the current environment.”

Gilt issuance may drop from the record level of 227.59 billion pounds in the fiscal year ended March 2010, Stheeman said, citing forecasts from the Office for Budget Responsibility, the government’s fiscal watchdog. The U.K. plans to aution 167.5 billion pounds of gilts in the 12 months starting April.

The government’s financing requirement, which determines the issuance of gilts, is projected to fall to 164 billion pounds next fiscal year, and 133 billion pounds the following year, according to the Debt Management Office’s website.

“There can always be surprises, and it’s a nature of the market and the economics that things don’t always turn out the way you would expect,” Stheeman said. “But the surprise can be in both directions.”

--Editors: Nicholas Reynolds, Mark McCord

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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