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30-year 1.25% Jul-51 gilt syndication preview

GILT SYNDICATION
  • The 1.25% Jul-51 gilt will be launched via syndication this week with the transaction likely to take place on today. We look for a transaction size of GBP5.5-6.5bln.
  • The gilt will in time replace the 0.625% Oct-50 gilt as the 30-year benchmark.
  • That gilt was launched in June via syndication for GBP9.0bln (Books of GBP72.8bln) with a further GBP21.6bln raised through 9 auctions between July and February.
  • Since September, bid-to-covers have been between 2.2x-2.4x (except for December which saw 2.64x). Tails in that period have ranged from 0.1-0.4bp, showing the strong demand for 30-year issuance.
  • The last similar gilt to have been launched via syndication was the 25-year 0.875% Jan-46 gilt in January which was launched for GBP6.5bln with books of GBP56.6bln.
  • According to the financing remit for FY21/22, GBP16.5bln is allocated for three conventional long-dated syndications which would see average sizes of GBP5.5bln per syndication.
  • With GBP10.5bln in the unallocated (ex-Green) bucket, we think there is scope for the DMO to increase the size of this week's transaction to around GBP6.5bln, in line with the size of the 0.875% Jan-46 syndication.
  • Timing: The last 3 gilt syndications have seen books open at 9:00 with an update at 9:30, the spread set at 9:45 and books close at 10:00. The size has been announced between 10:17-10:35 with pricing between 12:36-12:55. We note that the 1.25% Jul-51 gilt is due to be reopened via auction on 15 June.
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