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New 1.00% Jan-32

GILT AUCTION PREVIEW
  • The DMO will come to the market this morning to launch the new 10-year 1.00% Jan-32 gilt for GBP2.25bln.
  • This will become the 10-year on-the-run gilt, replacing the 0.25% Jul-31 gilt which has now has GBP39.0bln outstanding.
  • Tails have been widening on gilt auction recently, but we note that the 0.25% Jul-31 gilt never saw a tail wider than 0.2bp and with the relatively small auction size of GBP2.25bln (smaller than all auction of the 0.25% Jul-31 gilt except the last auction in October) we would continue to expect strong demand for the 10-year area of the curve.
  • We note that the last auction of the 0.25% Jul-31 gilt saw a bid-to-cover of 2.65x.
  • The 1.00% Jan-32 gilt is due to be on offer again once more this fiscal year, on 15 February.
  • Market colour: 10-year gilts have been outperforming Bunds since Omicron-related concerns started to impact the market. Markets see the uncertainty of the new variant delaying BOE hikes, while the ECB is still some way from tightening policy.
  • Timing: Results will be available shortly after the auction closes at 10:00GMT.
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