In an effort to generate more cash, £7 billion worth of bonds were put on sale today. The 50-year bonds are officially the longest-dated securities ever issued by a EU government.
The recession has placed the UK in its worst financial situation since the end of World War II, as a result, we have become the largest nation to sell bonds through a banking syndicate as opposed to a standard auction. The exercise is geared entirely towards cleaning up the countries finances which had the biggest budget deficit for any September since records began in 1993. Government statistics announced this week show a £14.8 billion shortfall as compared with £8.7 billion pounds for the same period last year. There are plans to sell £220 billion of the gilts until March 2010.
In a statement from Robert Stheeman, Chief Executive of the government’s Debt Management Office in London he said;
“The use of this issuance technique has enabled us to provide our core domestic investor base, including the U.K. pension and insurance sectors, with access to supply of the type of long-dated gilt that they particularly seek and in larger size than would otherwise be possible,”
Sam Hill, a money manager in London at Threadneedle Asset Management said;
“It shows there’s an enormous amount of appetite for long- dated gilts and it’s understandable, given the size of the deficit, that the Debt Management Office would seek to capitalize on that demand, there’s still a certain amount of caution about the outlook for the economy and there will have been some demand from people worried about that.”
The notes issued carry AAA grade from Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. They pay a semi-annual coupon of 4 percent, the sale was managed by Goldman Sachs Group Inc., RBC Capital Markets and Royal Bank of Scotland Group Plc.