Britain's sale of a 40-year government bond on Thursday attracted the weakest demand from investors out of any auction this year, although this was probably down to a mid-summer lull rather than political or economic factors. The UK Debt Management Office received bids worth 1.74 times the 2.0 billion pounds ($2.6 billion) of the 1.75 percent 2057 conventional gilt offered, the weakest bid-to-cover ratio since December.
Still, the gilt sold at an average yield of 1.600 percent with a yield tail of just 0.2 basis points, suggesting the auction itself went fairly smoothly and the DMO did not need to accept low-ball bids to sell the full amount of debt. "I'd be more worried if we got weaker cover and scrappier bidding," Marc Ostwald, strategist at ADM Investor Services, said.
"We're in something of a summer lull. It's mid-July, we haven't got any obvious coupon dates coming up and it's the start of the quarter. I don't think it'll have an enduring impact on the market," Ostwald added. In the cash market, short- and medium-dated gilt prices were fairly flat on the day as of 1019 GMT, after rising modestly in the aftermath of some weaker-than-expected British retail sales data for June.
The 2057 gilt was trading in line with the rest of the long-dated market, with its yield down just over a basis point on the day at 1.597 percent as the sector outperformed shorter maturities.
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