Exclusive-UK debt chief says demand back after mini-budget debacle
By David Milliken
LONDON (Reuters) — Demand for British government bonds has recovered from the damage dealt by the market turmoil which followed then Prime Minister Liz Truss' mini-budget last year, the chief executive of the UK Debt Management Office said on Wednesday.
Robert Stheeman, who is responsible for selling 237 billion pounds ($295 billion) of British gilts to investors this financial year, said he had been impressed by the rapid rebound.
«Considering the challenges that the gilt market faced last year, the speed with which conditions have returned to normal and the extent to which the market has stabilised I think is notable,» he said.
The recovery included renewed appetite from foreign investors, he told Reuters after a mid-year update on the DMO's issuance plans.
«I talked about how quickly things return to normal, and that definitely includes international interest,» Stheeman said.
In September 2022, the Bank of England (BoE) was forced to intervene in the bond market — buying 19 billion pounds of long-dated and inflation-linked gilts — after record price falls in response to Truss' budget plans put some pension funds at risk of collapse.
Since then, Prime Minister Rishi Sunak has put Britain's finances on a more orthodox course.
Britain no longer pays a big risk premium for its borrowing, but outright interest rates are still high, reflecting a global rise in central bank rates.
Just a month ago, 30-year gilt yields reached their highest since 1998 at 5.209%.
However yields have fallen in the past month, as investors judge central banks, including the BoE, will cut rates in 2024.
The DMO announced minimal changes to its plans on Wednesday, lowering gilt issuance by just 500 million pounds to 237.3 billion
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