Sigh of relief as long gilts sell like hotcakes

ULTRA long-term government bonds flew off the government&rsquo;s shelves yesterday, assuaging fears about its ability to raise money after its last auction failed in March.<br /><br />The Debt Management Office (DMO), which auctions the sovereign bonds known as gilts, received &pound;4.6bn of bids for the &pound;2bn of 40-year debt it was offering, triggering its new post-auction facility allowing successful bidders to grab a further 10 per cent of the bonds.<br /><br />RBS Capital Markets gilt expert John Wraith said: &ldquo;It&rsquo;s more a case of breathing a sigh of relief rather than seeing it as a start of a gilt market rally.&rdquo;<br /><br />The DMO failed to find buyers for the full &pound;1.75bn of paper it was offering at an auction in March in the first failed auction in seven years.<br /><br />The failure sparked fears the government was facing a funding crisis and would have trouble persuading investors to take on the record &pound;220bn of gilt issuance now expected to fund its fiscal stimulus ambitions.<br /><br />Gilt prices remained stable yesterday, as the 40-year gilt auction had been expected to be successful by analysts and attention was firmly focused on the &pound;3.5bn auction of 10-year gilts that takes place today.