© Reuters. FILE PHOTO: A person walks in Greenwich Park, with Canary Wharf in the distance, in London, Britain June 22, 2023. REUTERS/Hannah McKay/File Photo
By David Milliken
LONDON (Reuters) -Britain sold 4 billion pounds ($5.1 billion) of a new inflation-linked bond maturing in 2054, after receiving a record 56.4 billion pounds in orders, the United Kingdom Debt Management Office said on Wednesday.
The 1.25% November 2054 index-linked gilt was priced to pay a real yield of 1.2345% plus inflation, 1.5 basis points more than the 1.25% November 2055 index-linked gilt, which acts as the benchmark.
This represents a price at the top end of initial guidance, which is normal at British government bond syndications.
“The transaction achieved a very high-quality reception from our core investor base, as illustrated by a record-sized investor order book for this asset class,” said Jessica Pulay, the DMO’s co-head of policy and markets.
Domestic investors accounted for 93% of the buyers of the new bond, the DMO said.
Wednesday’s sale was the final bond syndication of the 2023/24 financial year for the DMO, which said strong demand allowed it to eliminate a residual unallocated 0.837 billion pounds in its fund-raising plan.
Britain uses syndications to sell bonds which either have a narrower investor base – such as life insurers and pension funds – or when it wants to sell more in a single transaction than is suitable for routine gilt auctions.
Bank of America (NYSE:), Goldman Sachs (NYSE:), Nomura and RBC acted as joint leads on Wednesday’s transaction.
Britain is on course to raise 237 billion pounds through gilt sales in the 12 months to the end of March, including 29.7 billion pounds through the sale of index-linked gilts.
For 2024/25, the DMO seeks to raise 265 billion pounds through gilt sales, which would be the second-highest on record after the pandemic year of 2020/21.
Sales in the coming year are planned to include three index-linked gilt syndications, raising 9.0 billion pounds, and 15 index-linked gilt auctions raising 19.9 billion.
Britain has been scaling back index-linked gilt sales. Although they allowed the government to borrow at negative real interest rates through much of the past decade, they left the public finances exposed to a sharp rise in interest payments when inflation surged in 2021 and 2022.
($1 = 0.7825 pounds)
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