U.K. 50-Year Gilt Wins Record Demand on Scarce Long Supply

  • Orders beat demand for U.K. government bonds of any maturity
  • New issue is Britain's second-longest dated conventional gilt

Britain’s new 50-year government bond drew record bids at its sale on Tuesday, buoyed by scarce supply of long-dated debt, subdued inflation and demand from pension funds.

The Debt Management Office sold 4.75 billion pounds ($7.4 billion) of gilts maturing in 2065 through banks. The orders exceeded 21.8 billion pounds, including 4.425 billion pounds from the joint lead-managing banks. That’s the biggest order book for any syndicated gilt sale, and surpasses the previous record of 16.5 billion pounds at an offer of 2045 securities in June last year, DMO spokesman Steve Whiting said.

“That’s a strong sale, and there’s plenty of demand out there from investors seeking to match long-term liability,” said Robin Marshall, director of fixed income at Smith & Williamson Investment Management LLP in London. “In a low-inflation and low interest-rate environment, long-dated bond yields at these levels are looking attractive.”

Strong demand allowed the DMO to increase the deal size by 200 million pounds, reallocating that amount from elsewhere in its issuance plan, Chief Executive Robert Stheeman said in a statement.

The bonds were priced to yield 2.557 percent and domestic investors bought about 95 percent of the securities, according to the DMO. Bank of America Corp., JPMorgan Chase & Co., Royal Bank of Scotland Group Plc and Banco Santander SA managed the sale.

The U.K. government has only one conventional bond of a longer tenor, coming due in 2068.

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