UK dealers call for more inflation-protection bonds, DMO says

LONDON (Reuters) – Dealers of British government bonds have recommended an increase in the share index-linked gilt sales to be sold in the 2022/23 fiscal year given growing demand for protection against rising inflation, Britain’s debt management agency said on Tuesday.

A range of between 12% and 16% of gilt issuance was mentioned by most gilt-edged market makers (GEMMS) who expressed a specific view, according to minutes of a consultation conference call held on Monday.

By comparison, index-linked plans for 2021/22 announced last October were for sales equivalent to 13.5% of total gilt issuance, or 26.3 billion pounds ($35.9 billion).

“In general, GEMMs advocated a modest proportionate increase in short conventional issuance in 2022/23 accommodated primarily by a reduction in the proportion of medium conventional gilts,” the minutes said.

Britain’s gross financing requirement for 2022/23 is currently projected to be at 215 billion pounds.

British consumer price inflation looks set to hit a 30-year high of 6% or more in April, with price pressures across major economies surging over the past year.

The minutes also showed strong support for further sales of green gilts, which raise money earmarked for investment linked to fighting climate change and protecting the environment.

But views were divided over the relative importance of building a yield curve through the launch of one or more new maturity bonds and increasing the outstanding amount of two existing green bonds, the DMO said.

There were also a few calls among dealers for the launch of a new index-linked green gilt.

Britain sold its first green bonds last year, with a sale of a 12-year issue and a long-dated bond maturing in 2053.

($1 = 0.7329 pounds)

(Reporting by Dhara Ranasinghe; Editing by William Schomberg)