Huge demand for gilts sale led by banks

<div>THE DEBT Management Office (DMO) raised a greater-than-expected &pound;7bn in a syndicated sale of 25-year gilts yesterday, easing fears of a lack of investor enthusiasm for British government debt.<br />&nbsp;</div>
<div>The DMO took orders for &pound;15.25bn worth of gilts, making the sale by far the most popular syndicated sale of sovereign debt in history.<br />&nbsp;</div>
<div>Yields on government bonds have risen since March on worries that gilt issuance would outpace supply and with Britain&rsquo;s credit rating cut to &ldquo;negative&rdquo; by Standard &amp; Poor&rsquo;s, some commentators had warned that the sale process could be undersubscribed.<br />&nbsp;</div>
<div>But the DMO, led by chief executive Robert Stheeman, was forced to expand the issue from between &pound;3bn and &pound;5bn to &pound;7bn amid a flurry of interest that covered the amount of gilts on offer more than twice over.<br />&nbsp;</div>
<div>The 2034 gilts, the first to be syndicated in four years, carry a coupon of 4.5 per cent, priced at a spread of 11 basis points more than the trading value of the 4.25 per cent gilt maturing in 2032.<br />&nbsp;</div>
<div>The DMO plans to raise up to &pound;225bn through the sale of Treasuries this year, a dramatic increase from last year&rsquo;s total of &pound;146.4bn.<br />&nbsp;</div>
<div>Yesterday's sale is unusual in that it was syndicated through four banks, HSBC, Barclays Capital, Goldman Sachs and Royal Bank of Scotland.<br />&nbsp;</div>
<div>The syndication process is more costly for investors because of fees paid to the banks, but reaches a wider base of investors.&nbsp;<br />&nbsp;</div>
<div>DMO chief executive Robert Stheeman said: &ldquo;The execution of this transaction has been very orderly and the result is I believe a very good one, both for the UK government as a sovereign issuer and for the market as a whole.&rdquo;<br />&nbsp;</div>
<div>Gross proceeds from the transaction are expected to be around &pound;6.85bn and take total gross gilt sales for the financial year to &pound;53.4bn.<br /><br />
<div>Yesterday&rsquo;s syndicated sale of gilt-edged securities &ndash; the largest in history - was handled by a quartet of banks acting as lead managers &ndash; HSBC, Royal Bank of Scotland, Goldman Sachs and Barclays Capital.<br />&nbsp;</div>
<div>Each bank&rsquo;s syndication team had responsibility for a different aspect of the sale.&nbsp;<br />&nbsp;</div>
<div>HSBC&rsquo;s team, led by PJ Bye, handled press and communications, while Barclays Capital&rsquo;s Sean Taor led their team controlling the exchange of older gilts among investors ridding themselves of bonds in order to take part in the new issue.<br />&nbsp;</div>
<div>Royal Bank of Scotland, led by Miles Clarke, took the lead on the legal documentation and the Goldman Sachs team headed by Martin Weber, was responsible for logistics.<br />&nbsp;</div>
The four banks reported to the DMO, the agency led by chief executive Robert Stheeman, which manages gilt sales on behalf of the Treasury.&nbsp;</div>