UK - The National Association of Pension Funds has voiced its disappointment at a £4.1bn cut in gilt sales following last week's speech by MP Ed Balls assuring fund managers of the increased issuance of long-dated bonds.
The Debt Management Office countered by saying that Ed Balls was correct in telling the NAPF conference that more long-dated bonds would be available, but in percentage terms not absolute.
A spokesman said that in fact, gilt issuance had been skewed to favour long-dated bonds and the reason for the cut was an overestimation in borrowing requirements.
The DMO maintained that a few years ago it principally sold short-dated bonds and despite a current growing overseas market for short and medium-dated bonds it would continue to sell a higher percentage of long-dated bonds to pension funds.
Toby Nangle head of gobal aggregate business, fixed income and currency at Baring Asset Management said: “There is a huge thirst for long dated gilts from UK pension funds and unless more supply is made available the current levels will remain insufficient.”
Criticism also came last week from some quarters who accused the government of borrowing cheaply whilst the going was good.
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The level of interest rate hedging increased to £29.5bn of liabilities in the second quarter as pension funds continued to de-risk, according to BMO Global Asset Management's research.
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