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Remit revision due at 7:30BST (2/2)

GILTS
  • Normally, a small change to the financing requirement would mean a change to the target T-bill stock or the "unallocated" portion of the gilt remit.
  • However, the consensus for this year seems to be closer to a GBP20bln reduction in the financing requirement for FY21/22 will be needed. This is likely to be too large for these usual tweaks.
  • This means that the DMO will either have to cancel auctions, make average auction sizes smaller or make the PAOF smaller.
  • We think that the latter is very unlikely and that auctions that are already announced for the current fiscal quarter are untouchable.
  • We think that after the unallocated bucket is reduced, the size of the other buckets will be reduced proportionately to each other (i.e. keeping the same percentage to each maturity bucket).
  • Past this, it probably doesn't matter too much to the market whether there are a small number of auctions for the July to March period cancelled or if average auction sizes are reduced.
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