The UK Debt Management Office is reducing long-dated gilt issuance to meet investor demand for shorter tenors, which are less exposed to bond market swings. Chief Executive Jessica Pulay announced a revision of this fiscal year's gilt sale plan, raising it by a few billion pounds while shifting issuance away from longer-dated debt. Long gilts will now make up only around 6% of this year's issuance, a significant drop from 30% five years ago.
Pulay cited persistent global bond market volatility as a key factor driving this shift, noting that shorter maturities are more cost-effective for funding government spending. The move has helped reduce the weighted-average maturity of UK debt to around 11 years from 17 about five years ago. In response to growing demand, the DMO cancelled three long conventional auctions for the rest of the fiscal year and detailed a new Treasury bill program set to start in January.
A repo facility will support the new program. Overall, market participants are keen to see greater liquidity in Treasury bills, which Pulay noted have worked efficiently in the gilt market for years.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing