Record-busting £53 billion stampede for UK coronavirus bond issue

THE UK saw record breaking demand for bonds issued to pay for the government’s coronavirus rescue package on Tuesday with more than £50 billion of orders flooding in in just 60 minutes.

To pay for its coronavirus stimulus measures, the Treasury is borrowing heavily from the bond markets by selling £225 billion of gilts to City investors.

In a sign of the clamour for UK bonds, the UK Debt Management Office saw record breaking order volumes for some of these IOUs in its latest fundraise. Around £53 billion of orders were chasing £7 billion worth of 2061 bonds, which are due to be repaid in 41 years.

That is a new record for such a long dated bond. It may be a sign investors are supportive of the outlook for the UK economy and the assistance from the Bank of England,

Nearly 160 fund managers submitted orders between 8:30am and 9:30am on Tuesday before books closed. Nine out of ten of the institutions who received an allocation were UK investors.

DMO chief Sir Robert Stheeman said: “Demand from our core investor base exceeded previous records for a long conventional gilt syndication.

“In particular, I welcome also the efficiency with which the sale was executed.

“The gilt market has demonstrated again its capacity to absorb smoothly the launch of a new gilt in large size and in this case with significant associated market risk, in the middle of a very busy issuance calendar.”

The sale was executed through a so-called syndicated bond offering, which is different to the usual process of auctioning the gilts.

A syndicated loan means investment banks effectively step in to run the sale. Deutsche Bank, NatWest Markets, Morgan Stanley and UBS were appointed on the deal.

The DMO is holding three syndicated loan offerings as part of its debt raising package. It will hold 49 conventional gilt auctions.