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

GILT AUCTION PREVIEW: The UK Debt Management Office (DMO) sells a new 10-year

benchmark, Gilt 1.625% Oct-28 Gilt Thursday for Stg2.5bln in size. 

- BACKGROUND: The Bank of England is in the midst of a period of asset purchases

but otherwise there are no coupon/redemption payments. The Apr/Oct coupon

payment cycle is a newbie.

- RV: There is nearly exactly one year of additional duration to the existing

benchmark, the Jul-27 and this is worth around 12bp at this section of the

curve. If anything, the Gilt 1.25% Jul-27 is fairly cheap on the curve so FV

roll should be close to or a little lower than 12bp. The 10Y spread to Bunds is

trading in the middle of the range but Gilts look very expensive to UST 10Y. The

2-10Y Gilt curve is extremely flat, with the narrowest spread since 2016 and so

extension trades are unlikely to assist this auction.

- HISTORY: By comparison, at the last 10Y auction, the DMO sold at an average

yield of 1.288% with cover of 2.38 times and tail of 0.1bp. 

- TIMING: Results are due to be announced around 1035GMT