Renewed investor interest in ultra-long gilts prompts DMO to consider new issue in October

DMO May Launch Ultra-Long Maturity Bonds in October

DMO May Launch Ultra-Long Maturity Bonds in October

Amid renewed investors interest in ultra-long maturity bonds, the Debt Management Office (DMO) is reportedly considering launching a new batch of 50 year maturity gilts in October this year.

The latest development comes at a time when demands for gilts are soaring. The launch of a new batch of 50 year gilts was widely supported by institutional investors at the latest quarterly meet held by the DMO, a spokesman said.

The yield on ten year bonds have sunk to a record low of 2.24 per cent on the back of strong demand as investors rush for safer investment avenues amid sliding equity markets and fear of sovereign debt crises spreading.

The DMO said gilt markets makers strongly supported the idea of 50 year maturity securities and advised a launch in October-November of the current fiscal.

“For the October syndication, a new 50-year index-linked gilt was the most popular choice with a range of views on the maturity in 2060 or 2065,” the minutes observed.

The decision on the new 50 year linker will be taken at a DMO meeting on Wednesday, the spokesman said.

The DMO had last launched a 50 year linker in 2005, though pension funds have been lobbying for them for some time now.

“The NAPF has argued for more long-dated and index-linked gilts. We hope that the DMO will listen to the feedback and issue a 50-year index-linked gilt,” said Darren Philip, policy director at National Association of Pension Funds (NAPF).

“We are aware of strong demand for long dated and index linked supply and we are attempting to respond by issuing in this area,” said DMO chief executive Robert Stheeman at a NAPF conference last year, acknowledging the demand.

“(However) a balance is needed and although there are high absolute levels in this area we also have to target areas of the market that are deeper and most liquid, which tends to be the shorts rather than the longs and linkers,” Stheeman had cautioned.

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