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1.25% Oct-41

GILT AUCTION PREVIEW
  • The DMO will come to the market this morning to sell GBP2.25bln of the 1.25% Oct-41 gilt.
  • In nominal terms, this is a larger auction than the last sale on 10 February (which saw GBP2.00bln nominal on offer). However, given the sell-off which was most pronounced from the end of January to the third week of February in cash terms the auction will only be slightly larger.
  • Demand for the 1.25% Oct-41 gilt has remained strong with bid-to-covers of the last three auctions not falling below 2.2x and the last auction seeing a bid-to-cover of 2.51x. Tight tails have made the auctions seem even more successful with the past three auctions seeing tails of 0.1bp.
  • Given the success of the 0.50% Oct-61 auction Tuesday last week, we see no concerns about demand for long-dated gilts and expect another strong auction today.
  • We note that although the auction calendar for April to June has not yet been confirmed, the DMO did specifically mention the 1.25% Oct-41 gilt as one of four long-dated gilts it would potentially re-open in the period.
  • As we noted when we set our expectations for issuance in this period in the MNI Budget Review, we pencil in two auctions of this gilt in the April to June period. This would be a slight slowdown in issuance for this gilt which has been sold in each month of the current fiscal year with the exception of January.
  • Timing: Results will be available shortly after the auction closes at 10:00GMT.
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