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

GILT AUCTION PREVIEW: The UK Debt Management Office (DMO) will re-open the

20-Year 0.125% Nov-2036 I/L Gilt on Thursday for Stg1.0bln.

- BACKGROUND: The DMO last re-opened the I/L 2036 in February, selling

GBP0.95bln at a bid-to-cover of 2.3x and real yield of -1.513%. 

- RV: After a 5bps rally in the past week, the real yield on the 2036 is

-1.505%, a little off the -1.451% high earlier in May but around the same yield

as the last auction in February. That said, it is trading a little cheaper

versus the curve compared with earlier in the year. The UK linkers curve has

compressed over the past month, and the 15-25 year segment has underperformed,

with 15s and 20s real yields down about 6.4bps, whereas 5s and 10s are down

around 13bps, and 50s down 6.7bps. This comes in the context of a rally of

similar magnitude in the nominal Gilt curve, alongside a combination of global

risk aversion and BoE dovishness. Looking at the bigger picture, though, the

20-year I/L real yield is trading 10.6bps narrower vs its average spread since

2015 vs the 5Y, 3bps vs 10Y, and 1bps vs 30Y, so no clear undervaluation.

- RESULTS: Auction results are due around 0935 GMT.