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0.125% Aug-31 linker

GILT AUCTION PREVIEW
  • This morning will see the DMO look to sell GBP1bln of the 10-year linker, the 0.125% Aug-31.
  • This will be the largest auction since the January launch which also saw GBP1bln on offer.
  • Since then, GBP800mln was sold in March and GBP900mln in April.
  • Bids have gradually declined through the auctions with over GBP3.0bln of bids in January but around GBP500mln less bids in April.
  • Despite this, we would look for the bid-to-cover to come in well in excess of 2x, particularly given the focus on inflation in markets recently.
  • Indeed, breakevens based on the 0.125% Aug-31 linker and the 0.25% Jul-31 gilt have risen by around 40bp since the launch of the linker in January to be around 3.57% at the time of writing.
  • The 0.125% Aug-31 linker is due to be reopened 8 September.
  • Timing: Results will be available shortly after the auction closes at 10:00BST with a further GBP250mln available to successful bidders through the PAOF.
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