By Andy Bruce
MANCHESTER, England (Reuters) – Dealers expect Britain to ramp up issuance of government bonds in the coming financial year, although by less than suggested by Debt Management Office (DMO) forecasts published in November, a Reuters poll showed on Tuesday.
Finance minister Jeremy Hunt looks set to keep his grip on public finances in Wednesday’s budget, holding off on any big tax cuts or spending increases until the next election comes closer into view.
The median forecast among banks that can bid directly at government bond auctions – known as gilt-edged market makers (GEMMs) – saw gilt issuance in 2023/24 at 231.9 billion pounds ($282 billion), up from the 169.5 billion pounds 2022/23 remit.
While that would be the second-largest gilt sale remit on record after the coronavirus-hit 2020/21 financial year, it would still be less than the 238 billion pounds that the dealers forecast before Hunt’s previous fiscal update in November.
“To be sure, the size of the issuance envelope will be historically high. But the good news is that it’s likely to be a lot lower than many, including us, feared late last year,” said Sanjay Raja, senior economist at Deutsche Bank.
Thanks to falling energy prices and stronger-than-expected tax receipts, Tuesday’s poll suggested the DMO will announce a gross financing requirement estimate for 2023/24 that will be about 30 billion pounds less than the 305.1 billion pounds it had pencilled in November.
The gross financing requirement is an estimate of the funds the government needs to raise to plug its budget deficit and roll-over bonds that are due to mature.
It comprises issuance of gilts, Treasury bills and savings products for consumers via National Savings and Investment (NS&I), the government’s retail finance arm.
Forecasts in the poll for gilt issuance ranged from 166.5 billion pounds to 260 billion pounds, reflecting uncertainty around how the government intends to raise funds in 2023/24.
Some forecasters thought issuance of T-bills and via NS&I would shoulder more of the financing requirement, therefore creating less gilt issuance.
Overall the survey pointed to a median 19 billion pounds in additional net T-bill issuance and 12.5 billion pounds from additional NS&I fundraising.
All figures in bln stg
GROSS NET T-BILL NS&I PSNB-e
GILT x
ISSUANCE
MEDIAN 231.9 19.0 12.5 123.9
MEAN 226.7 19.5 14.7 120.0
MAX 260 40 45 140
MIN 166.5 167.5 168.5 169.5
COUNT 13 12 12 8
BofA-ML 166.5 35 45
Barclays 230.8 25 7.5
BNP Paribas 233.1 20 15 127
Citi 246 13 10 123
Deutsche Bank 217 40 10 125
JP Morgan 105
Lloyds Bank 238 10 15
Morgan Stanley 242.5 12.5 10 124.8
NatWest 231.9 20 15
Nomura 240 17.9 6 108
RBC 226 10 15 107
Santander 205 20 20 140
TD 210
UBS 260 10 7.5
($1 = 0.8226 pounds)
(Reporting by Andy Bruce; Editing by Mark Potter)
