REPEAT: MNI: UK Linker Gilt Demand Remains Strong: DMO Chief

Repeats Story Initially Transmitted at 13:55 GMT Nov 9/08:55 EST Nov 9

--Stheeman: No Sign Of Offshore Buyers Deserting Gilts Post Brexit-Vote

By Nick Shamim

     LONDON (MNI) - The underlying demand for UK index-linked gilts remains

strong and there has been no overall fall in foreign demand for UK gilts since

the Brexit vote, Robert Stheeman, Chief Executive of the UK's Debt Management

Office told Market News in exclusive comments Thursday.

     Speaking to MNI on the sidelines of the Association of Financial Markets in

Europe's Bond Conference, Stheeman said the DMO is well aware of market dynamics

and its requirements surrounding the extension event that is due to take place

on Nov 22 and are taking steps to meet it.

     "We have an index-linked auction scheduled for Nov 21 to help flows around

the redemption of the 2017 maturity of index-linked gilt and we are planning to

schedule another index-linked syndication in Q4 to supplement the auction

programme," Stheeman added.

     His comments come ahead of a significant extension event on Nov 22, where

the IL22 gilt drops out of the index, extending the over 5-year index. In

addition, the IL32 gilt is due to drop out of the sub-15 year index and the IL17

is due to mature, with all events happening on the same day.

     Asked if the DMO had any concerns about gilt linker demand following

comments from the UK National Audit Office this week suggesting a rise of 1% in

RPI could potentially add around Stg26 billion in interest costs between

2016-/17 and 2020-/21, Stheeman said: "the exact composition of the debt

portfolio and the level of inflation exposure is something for Treasury

ministers to decide but I believe that underlying demand for index-linked gilts

remains strong."  

     "Our syndicated offering of a new 2048 maturity index-linked gilt received

record breaking demand - our largest ever order book on a syndication in cash

terms (Stg39.3 billion), our highest ever number of investor orders at 144, and

the largest ever book in nominal terms on an index linked syndication, at

Stg23.7 billion," Stheeman added. 

     "Given the size and quality of investor demand we increased the size of the

transaction to Stg3 billion (nominal) equivalent to Stg5 billion (cash)," he

said.

     Stheeman also dismissed any notion about an overall fall in foreign demand

for UK gilts since the Brexit vote.

     "Data published by the Bank of England last week showed continuing inflows

by overseas investors into gilts. According to that data, cumulative inflows

between April-August 2017 were Stg18.4 billion, generally consistent with the

pattern of overseas inflows in the previous two financial years," Stheeman said.

--MNI London Bureau; tel: +44 203-586-2229; email: nick.shamim@marketnews.com