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

GILT AUCTION PREVIEW: The UK Debt Management Office (DMO) taps the 43Y Gilt 4%

2060 Gilt on Tuesday for Stg0.4bln. 

- BACKGROUND: There is very little issuance in Europe in general at the moment

and this is a rare opportunity to buy at an illiquid part of the Gilt curve.

Because this 2060 Gilt is an old issue, it is likely specifically requested by

the GEMMs at this auction. We do not see difficult in selling this security. 

- RV: Outright, Gilt yields have been gradually declining since September at the

very long end of the curve. However, on the plus side the spread to the

benchmark 30Y, the Gilt 1.5% Jul-47 is 16.8bp and near the top of the recent

range. Since a 30Y-43Y curve spread will be heavily influenced by the price of

convexity and convexity valuation is influenced by volatility, it is not

surprising that the spread is wide while rate volatility is low.

- HISTORY: This security has not been sold since January last year. 

- RESULTS: Auction results are due around 1035BST.