UK: Uncovered gilt auction

Discussion in 'Economics' started by C6H12O6, Mar 25, 2009.

  1. C6H12O6


    So it seems that the troubles aren't in Eastern Europe but in UK.

    Failed gilt auction stokes fears over UK economy
    The Government has suffered a major blow to its economic stimulus ambitions after an auction of Treasury gilts failed for the first time in more than a decade, underlining the market’s fears about the state of the nation’s finances.
    By Philip Aldrick
    Last Updated: 12:41PM GMT 25 Mar 2009

    The UK Debt Management Office (DMO) attracted just £1.67bn in bids for its sale of £1.75bn of 2049 gilts this morning, its first uncovered auction of conventional gilts since 1995.

    The cover of just 0.93 times is believed to be the lowest in history and far worse than the 0.99 times in 1995. The average cover of the last three auctions was 2.1 times.
  2. Japan has had a couple of failed auctions of JGBs over the years. The bond bears always got excited that these marked the end of the JGB bull market ... still hasn't happened.
  3. how do their auctions work?

    I guess they offer them at a certain rate???

    If the auction determined the rate, for sure they would all get covered. What I mean is if the rate starts low and increases until there are bids, and keeps rising untill the offering is exhausted, there's no way they's have any left over.

    the only reason they don't get covered is because they must be offering rates of return that are too low.
  4. You can go to the DMO's website to read about the details of the auction process:

    The auction was bad, but not that bad, so I wouldn't read too much into it. The 40y point is a weird one and sort of falls between the natural demand areas.

    However, one thing that it should, hopefully, achieve is teach Merv the Swerve to keep his big mouth shut. His comments the day before were just completely senseless and counter-productive and now he has seen firsthand the damage that he has caused.
  5. m22au


  6. BTW, gilt is back to unchanged from having sold off a lot.
    • gm9.jpg
      File size:
      43 KB
  7. Hahahaha, this really has to be the biggest joke of all. The BoE buyback goes 35 cents through the mkt. Some gilt mkt-makers just pocketed a big chunk of UK taxpayer money.
  8. Time to buy some gilts it seems :cool: