Demand for U.K. Bonds Continues to Rise at 30-Year Debt Auction

  • DMO sell 1.75 billion pounds of conventional gilts due 2045
  • Bid-to-cover ratio on sale matches the highest since 2012

Demand for U.K. government bonds continued to rise at an auction of 30-year securities as investors bid twice the amount offered.

The bid-to-cover ratio rose to 2.08, from 1.73 at an auction of similar-maturity bonds last month. That matches the level of appetite at an offering in February, which was the highest since 2012.

Gilts reversed a decline from earlier in the day after the 1.75 billion-pound ($2.5 billion) auction, the first long-dated conventional gilt issue of the new fiscal year. The issue due 2045 followed the U.K.’s Debt Management Office overhaul of the way it conducts bond sales. The first two auctions since the changes came into effect, conducted earlier this month, also saw a jump in demand.

It’s “yet another strong auction,” said Daniela Russell, a portfolio construction associate at Legal & General Group Plc in London. “The bid-to-cover was much stronger than in recent long-end auctions. Again, further encouragement for the changes to the auction process that have been made. We’d seen a decent concession” before the sale with gilts underperforming U.S. Treasuries, she said.

The U.K. 30-year gilt yield fell three basis points, or 0.03 percentage point, to 2.30 percent as of 4:05 p.m. London time, after climbing to 2.36 percent, the highest since March 23. The 3.5 percent security due in January 2045 rose 0.775, or 7.75 pounds per 1,000-pound face amount, to 125.15.

Before it's here, it's on the Bloomberg Terminal.