March 12, 2019 / 7:19 PM / 14 days ago

UK gilt issuance to hit 123 billion sterling in 2019/20: primary dealers

LONDON (Reuters) - Britain’s government bond issuance is set to rise markedly in the coming 2019/20 financial year, pushed up by the need to refinance a slew of maturing bonds, a Reuters poll of primary dealers showed on Tuesday ahead of a budget update from finance minister Philip Hammond.

The Debt Management Office (DMO) is likely to announce a gilt issuance remit for 2019/20 of around 123 billion pounds, up from its current 2018/19 remit of 97.5 billion pounds, according to the median forecast from the survey of 11 out of Britain’s 15 primary dealers — banks charged by the government with creating a market for its bonds.

Much of this reflects the refinancing of almost 100 billion pounds of government bonds that will mature in the next fiscal year starting in April, when Britain needs to repay a host of debt issued after the financial crisis a decade ago.

Hammond is due to deliver an update on the outlook for Britain’s economy and government finances shortly before 1300 GMT on Wednesday, after which the DMO will publish its 2018/19 gilt issuance remit.

The poll showed the DMO is likely to lessen its issuance of inflation-linked gilts to just under 20 percent of total net issuance, which would be the smallest share since the 2007/08 financial year.

Primary dealers cited an element of doubt hanging over the future of British linkers as authorities are weighing whether to tie inflation-linked debt to the consumer price index rather than the outdated and widely criticized retail price index (RPI).

Lawmakers said in January that the formula for the RPI should be changed, partly because its use gives bondholders an unwarranted windfall of 1 billion pounds each year.

Reporting by Andy Bruce; Editing by Catherine Evans

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