UK - The National Association of Pension Funds (NAPF) has welcomed Treasury plans to concentrate the next 12 months' gilt issuance on longer-dated and index-linked paper

Gilt sales during 2010/11 will raise £187.3bn (€210bn) from outright auctions and supplementary distribution methods. Details were published in tandem with the Budget speech delivered by Alistair Darling, chancellor of the exchequer.

The planned split of issuance by maturity and type of gilt is 24% from long-dated conventionals, 24% from medium-dated conventionals, 32% from short-dated conventionals and 20% from index-linked gilts.

The combined issuance of long-dated and index-linked gilts - 44% of the total - will be a substantial percentage increase over 2009-10, when long-dated and index-linked gilts made up 35% of total sales.

Joanne Segars, chief executive, NAPF, said: "We are pleased the government has responded to NAPF pressure to skew gilt issuance to the long-dated and index-linked end. This will help pension funds reduce their deficits, scheme sponsors reduce their liabilities and is good news for all those saving into a pension."

Stuart Thomson, chief economist, Ignis Asset Management, said: "The estimated gross funding remit of £187bn was slightly disappointing, given the rapid decline in market expectations over the past week. However, the breakdown was in line with market expectations and consistent with our expectation that medium and long-dated forward gilt rates will outperform short-dated forward rates."

But Mike Amey, executive vice president and sterling portfolio manager at PIMCO, believes the issuance plans will not stabilise the bond markets.

He said: "We at PIMCO are still seeking clarity on the spending plans associated with the deficit reduction plan. Recent years have taught investors not to take guidance on ‘intentions' as a guarantee of future action. Until we have clarity on the full deficit reduction plan, we believe that UK bonds remain vulnerable to further bouts of volatility."

Meanwhile, the Debt Management Office said there were no plans at present to start using new instruments such as longevity bonds.

 

 

 

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