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IPE special report May 2018

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UK says funds buying long bonds for liabilities

UK – The UK’s Debt Management Office says pension funds and insurers are probably buying long-dated bonds in order to match their liabilities.

“It’s a very reasonable supposition to make,” said DMO spokesman Steve Whiting, when asked whether pension funds were among the buyers of the UK’s new long government bond, or gilt. “They’re after assets to shape their liabilities.”

He added that, according to the most recent figures available, pension funds and insurance companies held 64.5% of UK government bonds.

The office said yesterday that the 2.5 billion pound 4.75% 2038 gilt was 2.12 times covered. It was “the longest conventional gilt that we’ve issued,” Whiting said, adding that it is one of the longest in the world.

He said the office listens to the pension and insurance industry, which is calling for longer-dated bonds to match liabilities. He said the UK is planning 14.3 billion pounds of long-dated gilts, or more than 15 years, issues in 2004.

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