Demand high for UK gilts

BRITAIN received a flood of bids at a sale of 25-year government bonds yesterday, after a sharp rise in inflation spurred demand for good-value gilts that are less vulnerable to a rise in Bank of England interest rates.

This healthy demand for British government debt at a time of heavy public borrowing highlights the sharp contrast between market perceptions of the UK fiscal outlook and that for other large-scale borrowers such as Greece, Ireland and Portugal.

After a well-received £2.25bn auction of 25-year gilts, British gilt futures rallied 15 ticks to test a session high. The sale of 4.25 per cent March 2036 gilts drew bids worth 2.11 times the amount on offer, well above the 1.62 cover achieved at the last sale of this gilt in 2005.