DMO issuance cut leads to sharp drop in gilt yields

Budget saw reduction in net financing needs leading to cut in DMO remit for issuance

Jonathan Stapleton
clock • 1 min read
Gilt yields have fallen back since yesterday's announcement
Image:

Gilt yields have fallen back since yesterday's announcement

The Debt Management Office (DMO) has reduced the amount of gilt issuance over the remaining of the fiscal year – a move that has led to a fall in yields.

In a statement yesterday (27 October), the DMO said that planned total gilt sales in 2021/22 were falling by £57.8bn to £194.8bn.

The DMO has cancelled proportionally more auctions of long dated bonds - reducing issuance of these bonds by £13.3bn.

As a result of the announcement, ten-year yields fell by 0.13 percentage points to a three-week low of 0.98% yesterday.

Columbia Threadneedle Investments fixed income portfolio manager Alexander Batten said the reduction was more than markets had expected.

He said: "Although the market expected some reduction in gilt issuance, the £57.8bn that was announced is much higher than anticipated.

"As a result, the DMO has cancelled 18 of the remaining 32 auctions this fiscal year and has chosen to cancel proportionately more auctions of long dated bonds."

More on Defined Benefit

PIC invests £129m in LSE student accommodation

PIC invests £129m in LSE student accommodation

Postgraduate rooms will support 676 students with construction due to complete in 2024

James Phillips
clock 17 January 2022 • 2 min read
Protections for doctors and nurses under the Coronavirus Act 2020 will cease from March

Pension tax penalties could push 7,000 NHS retirements

An exodus is likely in March according to Quilter

Hope William-Smith
clock 17 January 2022 • 1 min read
BlackRock chief executive Larry Fink

BlackRock AUM exceeds $10trn with record ETF flows

A total $540bn (£395bn) of net flows were recorded for 2021

Ellie Duncan
clock 17 January 2022 • 2 min read
Trustpilot