Investors Show Strong Demand For Government Debt

Thu, 26 Mar 2009

The sale of £1.1 billion worth of government-guaranteed bonds received strong investor demand today, the Debt Management Office (DMO) has reported.

The DMO, which sells the gilts to raise money on behalf of the Government, said that it received nearly £3 billion in bids for the gilts, due to mature in 2022, at today’s auction.

It contrasts with yesterday's auction, when the government could not find enough buyers for its £1.75 billion sale of 40-year gilts - the first gilt auction failure in seven years.

Some analysts said the failed auction suggested that markets had lost confidence in the country's public finances at a time of record debt issuance.

Moyeen Islam, fixed income strategist at Barclays Capital, said: "There are concerns about the fiscal position. The Government has said it will issue £147 billion in gilts in the next fiscal year - a record high - and we expect them to revise that figure up by £10 billion or £15 billion in the Budget next month."

On Wednesday, the DMO said it had failed to attract enough bidders or its latest issue, making it the first time a gilt auction had gone "uncovered" since 2002.

Chancellor Alistair Darling denied he was struggling to raise enough money to meet his spending plans and dismissed yesterday’s failed auction as a one-off.
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