November 7, 2017 / 5:09 PM / 8 months ago

UPDATE 1-UK draws record demand for 2048 linker syndication sale

(Adds details, background)

LONDON, Nov 7 (Reuters) - Britain debt office generated record demand for the sale via syndication of an inflation-linked government bond, showing strong investor appetite despite the Bank of England’s first rate hike in a decade.

The syndicated 3 billion-pound sale of the index-linked 2048 gilt generated orders worth 23.7 billion pounds, the Debt Management Office said.

“I think this demonstrates the strength of demand for this important asset class,” DMO Chief Executive Robert Stheeman said.

Yields on 20 and 30-year British government bonds fell to their lowest levels in nearly two months on Tuesday, tracking similar moves in U.S. bond markets.

The DMO said the gilt was sold at a real yield of -1.541 percent, the lowest for any syndicated sale by the agency.

The BoE last week raised its benchmark rate to 0.50 percent from an all-time low of 0.25 percent but said it would move only slowly with further hikes, backing the market’s pricing of two more 25 basis-point hikes over the next three years.

Consumer price inflation has hit 3 percent, above the BoE’s 2 percent target. Although the central bank expects it will peak at 3.2 percent in the data for October, it also sees inflation above 2 percent throughout the next three years.

Tuesday’s sale was managed by BNP Paribas, Goldman Sachs International, Morgan Stanley and UBS Investment Bank. (Writing by William Schomberg, editing by Andy Bruce)

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