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

GILT AUCTION PREVIEW: The UK Debt Management Office (DMO) taps the 40-Year 1.75%

2057 Gilt Thursday for Stg2.25bln. 

- BACKGROUND: There are no redemption/coupon payments this week. Rising Gilt

yields might actually temper pension fund demand for longer dated Gilts. In

January, the Pension Protection Fund showed that DB pension schemes halved their

deficits in the month to Stg51bln. The 2057 Gilt has been syndicated twice in

2017. 

- RV: the 10-40Y spread has collapsed in 2018, making the 2057 appear poor value

for maturity extenders or those hedging with Gilt futures. Additionally, Gilts

have outperformed swaps by a significant margin in 2018, the 2057 was 26.5bp at

end-2017 and is 15.6bp today. Despite stronger inflation and threats of BoE rate

hikes, the long end of the Gilt curve has made only a slightly underperformance

of Bunds. 

- HISTORY: Last syndicated in May 2017 with as yield of 1.69%. 

- RESULTS: Auction result is due around 1035GMT.