UK Revises Borrowing with More Bonds, Fewer Long-Term Debt Sales Post-Budget
Britain's Updated Debt Issuance Strategy Following the Latest Budget
By David Milliken
Overview of the Revised Borrowing Plan
LONDON, Oct 28 (Reuters) - Britain will issue an extra £4.4 billion ($5.9 billion) of government bonds this financial year and sell £3 billion more of short-dated Treasury bills, the UK Debt Management Office said on Wednesday after finance minister John Healey's first budget.
The relatively modest upward revision relative to the last set of DMO plans in April was broadly in line with the expectations of bond dealers polled by Reuters.
Gilt prices edged higher after the DMO release, led by 20- and 30-year gilts whose yields dropped to a one-month low.
Shift Away from Long-Dated Gilt Issuance
The revised remit continued a shift away from costly long-dated gilt issuance and provisional plans for 2027/28 showed less of an increase in expected debt issuance than some dealers had been expecting.
Gross gilt issuance for 2026/27 will increase to £250.6 billion, broadly in line with dealers' median expectation of £249.6 billion in a Reuters poll, and up from £246.2 billion in the DMO's last remit update in April.
Net T-bill issuance will rise to £8 billion versus the £10 billion expected and £5 billion planned at the start of the financial year.
For 2027/28, the gross financing requirement – a combined measure of gilt and T-bill issuance and other sources of borrowing – is expected by the DMO to rise to £312.6 billion versus the £307.6 billion it predicted in March and April.
Dealers polled by Reuters had expected a median £26.7 billion upward revision to £334.3 billion.
Market Reaction and Expert Commentary
"The overall remit remains broadly manageable as shown by the relatively muted market reaction," Oliver Faizallah, head of fixed income research at wealth manager Raymond James, said. "Gilt yields at current levels continue to look attractive," he added.
Lowest Share of Long-Dated Issuance Since 1990
LOWEST SHARE OF LONG-DATED ISSUANCE SINCE 1990
The revised remit extended the trend towards shorter dated issuance, after 20- and 30-year yields hit their highest since 1998 earlier this month and 10-year yields were closing in on this record.
The DMO said that issuance of gilts with maturities of 15 years and over is planned to account for under 7% of issuance this financial year, which would be the lowest share since 1990/91 and is down from over 30% five years ago.
A greater proportion of gilts will be sold via syndication than originally planned, the DMO added.
UK to Sell First 12-Month T-Bill and Open Repo Facility
UK TO SELL FIRST 12-MONTH T-BILL, OPEN REPO FACILITY
Britain's finance ministry is also seeking to increase the net issuance of Treasury bills. These form a smaller share of long-term government funding than in other advanced economies and currently are mostly used for in-year cash management.
In January, Britain will launch its first 12-month T-bill and open a Treasury Bill Standing Repo Facility to boost liquidity in the market, the DMO said.
The facility will be open to primary dealers in T-bills and is likely to have a spread of 20 basis points below the BoE's Bank Rate, subject to review, the DMO added.
The DMO also said it would create a collateral pool of £250 million for each T-bill in issue, from which eligible counterparties would be able to borrow.($1 = 0.7527 pounds)
Reporting and Editorial Credits
(Reporting by David Milliken, editing by Paul Sandle and Toby Chopra)
