UK Government issues longest-dated bond since 1937

The UK Government is set to issue its longest-dated bond since before the Second World War, in its latest bid to capitalise on rock-bottom interest rates.

1937: Republican International Brigadiers at the Battle of Belchite
1937: Republican International Brigadiers at the Battle of Belchite

The Debt Management Office confirmed today that later this month it will issue a 55-year gilt. It is the longest-dated bond issued since the Debt Management Office was established in 1998; indeed, it is longer than any debt the UK Government has raised since 1937, when the Spanish Civil War was at its height. That bond expired in 1986-98.

The full announcement can be found on the DMO website here.

In last year’s Budget the Chancellor said he had instructed the DMO to explore issuing longer-dated bonds in order to lock in lower interest rates for longer periods. The longest-dated bonds at present tend to peak at around 50 years. However, gilt market practitioners have signalled that they may be reluctant to invest in the kinds of long maturities (such as 100-year or perpetual) that used to be commonplace in the Victorian era.

The Government’s cost of borrowing, as measured by the 10-year bond yield, recently hit the lowest level since records began, fuelled in part by the Bank of England’s quantitative easing programme, under which it has bought £375bn of gilts. Although rates have climbed in recent weeks, they remain extremely low by historical standards.

This new long-dated bond, which will expire in 2068, is being issued through a syndicate of banks rather than through the normal auction process, meaning there is no set amount to be raised, though it is expected to be in the billions.