UK Sovereign

Gilt Edged Market Makers (GEMMs) and investors are urging the UK’s Debt Management Office (DMO) to extend the Gilt curve with a 50 year or longer deal. The minutes of the DMO’s latest consultation, released on Tuesday, suggest that such deal is more than likely to come this quarter.

The UK’s Debt Management Office (DMO) said on Wednesday it will cut its planned syndication volumes for financial year 2013-2014 by more than half as compared to the previous fiscal year. The issuer also announced a slightly smaller funding target in its financing remit for the new fiscal year which will begin in April.

The UK Debt Management Office reopened its 0.25% 2052 index linked Gilts to the tune of £3.75bn on Tuesday. Despite Moody’s downgrading the UK late last week and Europe’s debt markets being engulfed in volatility on Tuesday following the disappointing results to Italy’s government elections (see separate story), the DMO book build was a bun fight and the tap was priced flat to secondaries

The UK Debt Management Office should sail through its final syndication of the year on Tuesday despite Moody’s cutting the sovereign’s rating late last week, said SSA bankers and analysts. The Gilt market on Monday barely registered the downgrade.

The DMO has mandated banks for its final syndicated trade of the 2012 fiscal year, a tap of long-dated inflation linked Gilts. The deal is likely to see sharper investor demand due to the Bank of England’s higher than expected inflation forecast issued on Wednesday.

The UK will wrap up its syndication programme for financial year 2012-13 with a re-opening of its 0.25% index-linked 2052 Gilt, its fifth index-linked syndication of the financial year.

The United Kingdom’s Debt Management Office printed its first syndicated trade of 2013 on Tuesday, a tap of a 31 year Gilt. The deal reached subscription quickly and achieved a healthy oversubscription over the course of the hour long bookbuild. The borrower will round out its syndicated funding year with an index linked bond in February.

Network Rail is looking at the possibility of issuing a linker, while Axa has suggested that a new breed of linkers should be introduced that would appeal to pension funds. The developments follow the UK government’s decision to leave RPI unchanged earlier in January which means that index linked bonds in sterling are free from the shadow of uncertainty.

The UK’s Debt Management Office and the Dutch State Treasury Agency have taken a “sensible” approach by targeting long dated deals in the early part of 2013, bankers told SSA Markets.

UK investors have taken the most sensible possible reaction to the news that S&P has revised its outlook on the UK’s credit rating to negative, and heaved a collective sigh of boredom.

Standard & Poor’s cut its outlook on the UK’s credit rating on Thursday evening, leaving the UK lumbered with a negative outlook on its AAA rating from all three major ratings agencies. However, the impact on UK government debt has been minimal and even a full downgrade of the UK’s credit rating in 2013 is unlikely to cause much damage.

The UK’s Debt Management Office (DMO), which plans to sell a pair of syndications before April 2013, may well increase its issuance in the medium part of the curve during its next fiscal year, according to Morgan Stanley.