TonyGosling Editor
Joined: 25 Jul 2005 Posts: 18335 Location: St. Pauls, Bristol, England
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TonyGosling Editor
Joined: 25 Jul 2005 Posts: 18335 Location: St. Pauls, Bristol, England
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Posted: Fri Jan 20, 2017 1:56 pm Post subject: |
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UK DMO's Stheeman expects 'efficient' market reaction to higher UK debt issuance
http://uk.reuters.com/article/uk-britain-eu-budget-dmo-idUKKBN13I1WR
British government bond prices are likely to react in an "efficient" manner to the big rise in borrowing announced by Chancellor Philip Hammond on Wednesday, the head of the country's debt agency said.
Robert Stheeman, chief executive of the UK Debt Management Office, said he wanted to avoid focusing too heavily on any one maturity of gilt after the DMO had to revise up its mid-year debt issuance plans by the largest amount since 2008.
"It's about not putting all of our eggs in one basket," he told Reuters. "A lot of people were saying prior to the Budget (in March) that we must issue more longs. But since then, and at a time when you have curve steepening, those longs can potentially become relatively more expensive."
British debt prices fell on Wednesday after Hammond's announcement of 122 billion pounds of extra borrowing over the next five years.
Higher government borrowing needs prompted the DMO to raise its plans for gilt issuance in the remainder of the financial year by 15.0 billion pounds to 146.5 billion pounds, much more than the 2.9 billion pound increase forecast in a Reuters poll.
"The size of the increase in the financing requirement may be bigger than the market expected, but the market has a really good track record of absorbing these things. My sense is that the market is efficient at repricing itself," Stheeman said.
Any lasting rise in gilt yields adds to upward pressure on global government borrowing costs following the election of Donald Trump as U.S. president earlier this month.
"From our perspective that calls for us to be a little bit circumspect in designing financing remits in the UK, to make sure that they are broadly based and balanced," Stheeman said. "If U.S. yields rise, to think the rest of the world will be unaffected is a bit of an illusion."
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