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PREVIEW: 0.125% Mar-73 linker

GILT SYNDICATION
  • The DMO will hold a syndicated reopening of the 50-year 0.125% Mar-73 index-linked gilt with the transaction likely to take place today.
  • This will be the first reopening of the 50-year linker since its launch via syndication in November. That transaction saw books of GBP17.7bln with GBP1.1bln nominal issued at a price of 355.948 (raising cash of GBP3.9bln).
  • Since the launch, inflation concerns and real yields have increased substantially and the price of the linker has fallen by around 30%. We therefore expect a larger syndication size in nominal terms (but similar in cash terms), and pencil in a transaction size of GBP1.5-1.6bln nominal.
  • Despite the recent market moves, we expect continued strong demand from the domestic market particularly UK pension funds (the launch saw 94% of the allocation taken domestically).
  • Timing: Books on UK syndications usually open at 8:30 or 9:00 with an update 30 minutes later, the spread set 45 minutes after books open and books close an hour after opening. For the past couple of syndications, the size has been set around 25 minutes after books close. Since the beginning of the FY2020/21, the price has been set between 12:10-13:21.
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