UK may issue more 50-year bonds

BRITAIN’S DEBT office chief said on Tuesday the country may issue more ultra-long-dated bonds this year, following robust demand just a month ago for its sale of a new 50-year bond.

Britain saw a record £37.8bn of demand at the introduction of a new bond maturing in 2071 last month, showing continued strong investor appetite for British government debt.

“Having just issued (the 2071 bond) we are not going to leave it stranded there,” Robert Stheeman, the chief executive of the UK Debt Management Office, said. “We will certainly be looking to build up there.”

The DMO has said it aims to raise at least £4.7bn in cash terms through a single long-dated bond syndication in the second half of its financial year, which runs until April 2019.

Ultra-long British government bonds typically draw strong demand from life insurers and pension funds, who use the securities to match long-term liabilities.

Governments globally have been issuing longer-dated bonds to lock in historically low borrowing costs. Investors are seeking out longer maturities for higher returns amid very low interest rates.

Stheeman said post-crisis regulation was probably squeezing banks’ ability to serve bond markets, after several firms quit as primary dealers of British government debt.