The UK Debt Management.........>

GILT AUCTION PREVIEW: The UK Debt Management Office (DMO) re-open 10-year

benchmark 1.25% July 2027 Gilt Wednesday for Stg2.5bln in size. 

- BACKGROUND: This auction is caught between the big Gilt sell-off from

yesterday, helped by strong CPI data and the MPC meeting tomorrow. We might also

add the important average hourly earnings report at 0830 GMT i.e. just one hour

before the auction, which will complicate the set up. There are no redemption or

coupon payments to assist. 

- RV: There is a fairly good estimated 3m roll and carry of 5.4bp for the 2027.

10Y Gilt yields are very attractive compared to 24 hours ago thanks to the large

sell off. The rise in yields should be very supportive for this auction but

counting against is a flattening of the spread to the previous 10-Year

benchmark, the 1.5% Jul-26 to 14.7bp.

- HISTORY: By comparison at the last auction on Aug 1, the DMO sold E2.25bln at

an average yield of 1.267% with cover of 2.56 times and tail of 0.2bp. 

- TIMING: Results are due to be announced around 0935GMT