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PREVIEW: 1.50% Jul-53 green gilt

GILT SYNDICATION
  • The second green gilt is expected to be launched via syndication today, the long 30-year 1.50% Jul-53 gilt (ISIN: GB00BM8Z2V59 ).
  • The transaction had long been penciled in to take place this week. UK syndications normally take place on a Tuesday, but following some announcements on green policy/spending by the government a decision was made to hold the syndication later in the week.
  • The transaction size is expected to be in the GBP5-8bln range. Note that a minimum of GBP15bln of green gilt issuance was planned for the FY21/22 and GBP10bln was raised through the inaugural green gilt syndication last month (the 0.875% Jul-33).
  • We expect very strong demand, albeit book sizes are likely to be smaller than for the 0.875% Jul-33 green gilt.
  • We note that the gilt yield curve is downward sloping after 30-years out, but we would still expect to see the 1.50% Jul-53 gilt yield 1-3bp lower than the 1.625% Oct-54 gilt due to the "greenium".
  • Joint bookrunners: BofA Merrill Lynch, Morgan Stanley, NatWest Markets, RBC CM and Santander.
  • Timing: The 0.875% Jul-33 green gilt that was launched last month saw books open at 9:00BST (books tend to open either 8:30 or 9:00 for gilt syndications).
    • The spread was set 30 minutes later, with a further update 15 minutes later before books closed at 10:00BST, an hour after opening. Typically for a gilt syndication, the spread is set in the second update, rather than the first but there was huge demand for the 0.875% Jul-33 green gilt.
    • The size was set at 10:54 BST (typically set between 20-60 minutes after books close) and was priced at 13:18BST (since the beginning of FY20/21 pricing has been between 12:22-13:21).
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