Debt of­fice: Global gilt de­mand to be ro­bust de­spite Brexit

The Star Malaysia - StarBiz - - Foreign News -

LON­DON: Over­seas ap­petite for UK gov­ern­ment bonds should re­main re­silient in the face of Brexit un­cer­tainty as in­vestors seek high-qual­ity and liq­uid as­sets in their port­fo­lios, ac­cord­ing to the coun­try’s debt of­fice.

For­eign in­vestors have shown no sign of re­duc­ing their ap­petite for gilts since Bri­tons voted to leave the Euro­pean Union (EU) last year, debt man­age­ment of­fice chief ex­ec­u­tive Robert Sthee­man said.

While un­cer­tainty sur­round­ing the UK’s talks to leave the EU has clouded the out­look, in­ter­na­tional de­mand for gilts has been boosted with the pound’s slump since Brexit, mak­ing hold­ing the se­cu­ri­ties more at­trac­tive to over­seas in­vestors.

Sthee­man’s com­ments come ahead of for­eign buy­ers giv­ing their lat­est ver­dict on the notes, with the Bank of Eng­land (BoE) re­leas- ing its lat­est data on in­ter­na­tional de­mand for gilts yes­ter­day.

“While some over­seas in­vestors may take short-term tac­ti­cal de­ci­sions re­gard­ing in­vest­ing in gilts, we would ex­pect the over­all strat­egy par­tic­u­larly of over­seas in­sti­tu­tional in­vestors to con­tinue to fo­cus on hold­ing high-qual­ity or liq­uid as­sets which will con­tinue to be sup­port­ive of gilts,” Sthee­man said in an emailed re­sponse to ques­tions.

“A con­tin­u­ing goal is to im­prove in­vestor re­la­tions and un­der­stand bet­ter the na­ture of in­ter­na­tional de­mand for gilts.”

The yield on gilts, al­though lit­tle changed from the end of 2016, re­mains well above cor­re­spond­ing Ger­man or French debt.

The yield on 10-year UK gov­ern­ment bonds was up one ba­sis point at 1.26% on Mon­day, com­pared with 0.34% and 0.68% for their coun­ter­parts in Ger­many and France.

Non-res­i­dent in­vestors bought a net £3.6bil (US$4.8bil) of notes in Septem­ber, ac­cord­ing to BoE data, with the sec­ond large month of con­sec­u­tive buy­ing re­as­sur­ing the mar­ket af­ter out­flows in July. — Bloomberg

A con­tin­u­ing goal is to im­prove in­vestor re­la­tions and un­der­stand bet­ter the na­ture of in­ter­na­tional de­mand for gilts. Robert Sthee­man

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