U.K. to Tap Market With 53-Year Bond as Yields Trail Inflation

(Bloomberg) -- The U.K. is set to issue a 53-year bond, making it the longest-maturity debt on the market, as the nation seeks to lock in low borrowing costs.

The gilts, which will mature in 2071, will be sold via syndication this month. It will replace a 2068 note that is the longest-dated debt now available to investors. With global bond yields still not far off record lows, the U.K. joins a string of countries that have sought to extend their debt profile recently.

Austria successfully sold a 100-year bond in September, while other European debt issuance agencies have been in consultation with the market over the cost effectiveness of such long-dated debt. The U.S. is one of the few to buck the trend, with the Treasury department stopping a long-held policy of lengthening the yield curve.

“Clearly for borrowers there’s a desire to issue very long dated debt and lock in historically low borrowing costs for as long as possible,” said John Wraith, head of U.K. macro rates strategy at UBS Group AG. “Investors have been starved of yield for so long since the financial crisis that some may be attracted to the higher yield on offer on very long dated debt.”

The yield on 30-year gilts still languishes below 2 percent, trailing inflation that is running at 2.5 percent.

“The Debt Management Office is convinced there’s robust demand for yet longer issuance,” Wraith said. “If you look at how longer gilts have been trading, it supports the view demand is very strong.”

The securities will be sold via syndication in the week beginning May 14. The sale comes after a consultation with market makers in March.

To contact the reporters on this story: John Ainger in London at jainger@bloomberg.net, Anooja Debnath in London at adebnath@bloomberg.net.

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Scott Hamilton

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