UK - Planned UK gilt sales in 2010-11 are being reduced by £20.2bn (€24.6bn) to £165bn as a consequence of new forecasts for public finances published in the Budget.

The reductions, announced by the UK Debt Management Office, are being implemented so as to maintain the existing proportionate split of issuance between maturities and types of gilt.

No changes are planned for Treasury bill sales.

Short-dated conventional gilts remain the biggest individual category, comprising 31.9% of the issuance, although reduced by £6.4bn to £52.6bn.

Medium-dated conventional gilt sales have been reduced by £4.7bn to £38.2bn, making up 23.2% of the total.

Long-dated conventional gilts make up 24.5% of the issuance, cut by £4.9bn to £40.4bn, while index-linked gilt sales will be cut by £4.2bn to £33.8bn, or 20.5% of the total.

Planned sales at auctions are being reduced by £14bn to £132bn, with three auctions being cancelled - one each of short, medium and long-dated conventional gilts.

The first of these is the auction originally scheduled for 13 October.

Planned sales via supplementary distribution methods will be reduced by £6.2bn to £33bn.

As many as eight syndicated offerings will be held in 2010-11, but up to three mini-tenders will be cancelled, the first being originally scheduled for the week commencing 5 July.

However, an M&G spokesman said investors should guard against assumptions of any significant impact on yields, as the reduction should be taken in context.

He said a giant deficit had been built up over recent years, followed by the quantitative easing programme, and that these huge fluctuations in supply and demand had simply pushed gilt yields downward.

Meanwhile, PricewaterhouseCoopers (PwC) has warned that the bank levy announced in the Budget could hurt UK asset managers.

From January 2011, the levy will be applied to the balance sheets of UK banks and building societies, as well as to the UK operations of banks from abroad.

There will be deductions for Tier 1 capital and insured retail deposits, as well as a lower rate for longer-maturity funding.

Smaller banks with liabilities below a certain level will not be liable to the levy, which is expected to raise more than £2bn a year.

However, Teresa Owusu-Adjei, asset management tax leader at PwC, said: "One of the most difficult issues associated with the bank levy will be defining which institutions should be subject to the charge.

"The experience with the bank payroll tax demonstrated that defining what is a 'bank' and 'banking-type activities' is not straightforward, and asset managers will be keen to ensure they are not inappropriately subjected to levies that are intended for banks."



She said this could mean higher asset management fees, although she believed lessons had been learned from implementing the bank payroll tax and that asset managers would not be unfairly drawn into the net.

She also welcomed the government's commitment to consult the industry on a range of issues to improve the asset management sector's competitiveness.

"Over the next couple of years, the implementation of the AIFM and UCITS IV directives will fundamentally change the way asset managers operate within Europe.

"To be regarded as a location to domicile funds, it is important for the UK to be perceived by asset managers and investors as having a competitive tax regime for its fund structures."