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Preview: 1.125% Jan-39

GILT SYNDICATION
  • The only gilt issuance of the week will be the launch of the new 1.125% Jan-39 gilt via syndication.
  • We expect the transaction to take place tomorrow, with gilt syndications typically taking place on n Tuesdays.
  • This will be the third syndication of the fiscal year following the launch of the 30-year 1.25% Jul-51 gilt in April and the 0.125% Mar-39 linker in May. These transactions were sized at GBP6.0bln and GBP4.0bln nominal respectively.
  • We would expect strong demand at this week's transaction with a likely size of GBP6.0bln.
  • We note that there are no conventional gilts with current coupons between the 1.75% Sep-37 gilt and the 1.25% Oct-41 gilt, so the 1.125% Jan-39 gilt is filling a gap in the curve for a current coupon bond.
  • The free float of the closest-maturity gilt, the 4.75% Dec-38, is also rather low: despite GBP25.7bln of the gilt outstanding, GBP11.1bln is owned by the Bank of England (through the APF) and a further GBP7.3bln held by the government, leaving just GBP7.4bln held by the market.
  • Timing: Books tend to open at either 08:30 or 09:00 UK time with the spread set 45 minutes later and the books closing an hour after opening. Sizes for all transactions since April 2020 have been set between 10:08-10:35 with pricing between 12:36-13:21.
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