Value of expressions of interest in ultra-long gilts reaches £12.8bn in an hour

Launched on 25 June, when the joint book-runners closed the book, the size of the deal was nominally £5bn and priced at 3.5 basis points above the yield on the 4% Treasury gilt 2060, a 47-year gilt.

However, within 55 minutes, expressions of interest for the gilt reached £12.8bn with 69 orders. Around 97% of the orders came from within the UK market.

DMO chief executive Robert Stheeman said the launch of the 55-year gilt is in line with the government's policy to extend the nominal yield curve.

He added: "Today's transaction has mobilised very strong core domestic investor demand for the first ultra-long gilt. The size and quality of the order book was particularly impressive. It was very pleasing to see this demand materialise despite the current volatile market backdrop.

"As a consequence of this, we decided to increase the size of the offer to £5 billion, consistent with the greater flexibility provided in this year's remit regarding the sizing of syndications, subject to the extent and quality of demand at each operation.

"The smooth execution of today's transaction in the prevailing market circumstances once again reflects very well on the efficiency and depth of the gilt market and the support shown by our investor base and our primary dealers."

The government gave the green light for ultra-long gilts by removing the maturity cap in last year's Autumn Statement (PP Online, 5 December 12).

Russell Investments head of liability driven investment solutions David Rae said: "We should bear in mind that the amount of the issue at £5bn represents only around 0.5% of total defined benefit pension liabilities.

"Given the recent high levels of market volatility this highlighted the efficiency and depth of the Gilt market.

"It is clear that the pension funds have not been unduly spooked by the sell-off in government bond markets and are still looking for opportunities to better manage the interest rate risk of their liabilities."

The ultra-long gilt syndicated offering was managed by by four joint book-runners: Barclays, Lloyds Bank, Nomura and Royal Bank of Scotland (RBS).

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• Topics
• Investment
• gilt yields
• UK gilt market
• DMO
• Lloyds
• Barclays
• Nomura
• RBS