U.K.’s Latest Debt Sale Will Likely Be Another Blockbuster

(Bloomberg) -- Demand for government bonds is showing no signs of letup, with Ireland securing record investor demand despite a host of countries, including the U.K., selling debt.

Ireland racked up more than 69 billion euros ($78 billion) for its bonds, the U.K. has notched up above 70 billion pounds ($88 billion) and Spain attracted about 78 billion euros in demand for its sale. All of the offerings -- and another from Greece -- are being sold via banks.

Those sales helped bond sales in the region surpass 1 trillion euros for the year, a landmark reached in record time.

Debt sales, especially the syndicated variety, are in high demand given that countries are having to borrow massive amounts of money to stimulate their economies. Still, central banks are providing a backstop, with the European Central Bank last week boosting its emergency pandemic bond buying program by 600 billion euros and the Bank of England expected to increase quantitative easing by 100 billion pounds next week, according to Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.

“Several periphery issuers decided at once to utilize the conducive post-ECB environment,” wrote Commerzbank AG strategists Christoph Rieger and Cem Keltek.

Germany and Finland announced that they would conduct similar operations for 30-year and 20-year bonds respectively.

But aside from central bank support, bonds have cheapened across the developed world after a recent sell-off. The rate on U.K. debt due in 30 years, a similar maturity to the Tuesday’s offering, rose almost 20 basis points this month. Investors are keen to lock in these yields, which could fall if the BOE boosts its QE program.

“Recent long-end gilt syndications have been very well subscribed,” said Peter McCallum, a rates strategist at Mizuho International Plc. “Investors are also searching for yield now that markets have normalized somewhat, and this makes a long-end syndication very attractive.”

Syndications have become an increasingly popular way to issue government bonds following the pandemic, because larger-than-usual amounts can be raised. Banks involved in the deal agree to underwrite the offering in return for fees, avoiding the embarrassing possibility of failing to find sufficient demand.

A similar syndicated offering in May for 40-year debt saw demand outstrip supply seven times over, while Italian and French sales have drawn record bidding.

©2020 Bloomberg L.P.