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Tender operation this week?

GILTS
  • There is only one auction scheduled for the week ahead (for the 0.625% Oct-50). So far this fiscal year the only week that has only seen one supply event was the week commencing 4 January, the first week back for many traders after the Christmas holidays. We assume that supply had been kept light in this week to give the DMO the flexibility to either hold an extra syndication or a tender. The DMO has already confirmed that it has completed its syndication programme for the fiscal year. And, although we would not completely rule out a tender operation, the MNI Markets team thinks that the OBR's commentary on the state of the public finances on Friday has lowered the probability of a tender operation this week.
  • The OBR stated on Friday that year-to-date public sector net borrowing (PSNB) ex-write offs was GBP39.8bln lower than expected in its November forecast. Some of this is due to less deferrals of self-assessment tax in January than expected (and to a lesser extent greater VAT cash receipts) which pulls some of the expected receipts from fiscal 2021/22 into this fiscal year. The other caveat is that the OBR's commentary generally refers to accrual-based accounting rather than giving a direct indication of the state of cash requirements versus its November forecast. However, it seems very likely that the government's cash position is better than expected, which the MNI Markets team thinks lowers the probability of a tender operation this week.
For more on upcoming UK events including auction previews see the MNI Gilt Week Ahead.
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