UK Sells Record £13 Billion in 10-Year Bonds Amid High Demand
London - The United Kingdom (UK) has surpassed its previous record by selling £13 billion ($16 billion) in 10-year bonds. The sale attracted exceptional demand from investors seeking to secure yields near multi-decade highs.
According to sources, the government received over £140 billion in orders for the debt, which was syndicated through banks. This demand significantly exceeds the previous benchmark set less than a month ago.
The surge in appetite reflects investors' desire to lock-in current yields as the Bank of England (BOE) continues its interest rate reduction policy. It also suggests that concerns regarding fiscal responsibility and bond oversupply have subsided, which had previously weighed on the UK bond market.
"Debt sustainability worries have eased, and the dovish BOE decision has likely boosted sentiment," stated Evelyne Gomez-Liechti, strategist at Mizuho International.
The pricing of the sale was set at 5.5 basis points over comparable bonds, tighter than the previously indicated range of 5.5 to 6 basis points.
Debt syndications allow governments to raise substantial funds rapidly while diversifying their investor base. Notably, UK 10-year yields spiked to nearly 5% last month, the highest since 2008, due to investor reluctance towards the significant bond sales announced in the October budget.
Yields have since receded and currently stand at 4.48%, a three-basis-point increase. This week's sale size implies a meaningful reduction in government bond issuance for the remaining fiscal year ending in April.
"The transaction signals the peak in gilt supply for this quarter," said Megum Muhic, a strategist at RBC. "The gilt supply schedule will continue to support gilt outperformance until March."