This is a crucial market. Financing costs are low; the UK can raise 30-year index-linked bonds at just 1 per cent. Potentially, there is also large demand from pension funds. One snag is that banks and market makers do not like holding long bonds as their duration makes them risky. By book building directly among pensions funds, syndicates circumvent such problems, allowing the DMO to raise more money, more securely.
Thursday, April 02, 2009
The FT looks at gilt sales, suggesting syndicated sales of long-dated and index-linked issues to reach demand without leaving market-makers with interest-rate risk.