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UK schemes buying index-linked for liabilities

UK – The Debt Management Office says it’s a “fair assumption” that UK pension funds were among the buyers at today’s auction of index-linked government bonds.

“It’s a fair assumption to make that buyers included pension funds seeking to match their liabilities,” said DMO spokesman Steve Whiting.

“Certainly pension funds and insurance companies are the largest holders of gilts,” Whiting said, adding that pension funds hold around 60% of all gilts UK government_bonds and 80% of long-dated gilts.

He said the DMO regularly consults with market makers and investors on what maturities they like. The last meeting, in September, saw “quite widespread” calls for long-dated gilts.

The office said today’s auction of 600 million pounds of two percent index-linked treasury stock 2035 received 1.17 billion pounds of bids and was 1.95 times covered.

Last month’s auction of 350 million pounds of 2 1/2% index-linked stock 2016 received bids of 883.95 million pounds and was 2.53 times covered.

The UK has said it plans to raise 7.8 billion pounds in 10 auctions of index-linked stock in 2004. Today saw the seventh index-linked auction, after which there will be 5.55 billion pounds of the stock outstanding.

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