Long-dated UK gilt prices jump on issuance plans

By Andy Bruce

LONDON, March 13 (Reuters) - Long-dated British gilt prices

rose on Tuesday after the country's debt agency said it planned

to issue fewer of the bonds in the 2018/19 financial year than

analysts had expected.

The Debt Management Office (DMO) said it planned to issue

102.9 billion pounds ($143.9 billion) of gilts in 2018/19, close

to the consensus forecast of 100.7 billion pounds by 15 primary

dealers in a Reuters poll.

That marked the smallest volume of planned gilt sales since

2007/08 and was a reduction from the 115.1 billion-pound remit

for the current 2017/18 financial year.

The new issuance plans came after British finance minister

Philip Hammond presented his half-yearly budget update in

parliament. He outlined a fairly sombre outlook for economic

growth but a slightly better picture for the public finances

Gilt prices rose as Hammond said Britain's budget deficit

was likely to shrink a little faster than forecast previously,

but analysts said the move probably owed more to U.S. data

published around the same time that showed slowing inflation.

Gilts continued to follow German Bunds and U.S. Treasuries

in late trading, although the longest-dated British bonds

outperformed.

The DMO said it expected long-dated bonds to account for

28.5 percent of total gilt issuance in 2018/19, slightly less

than the 30 percent expected by primary dealers.

As a result, the 30-year gilt yield , which moves

inversely to the price, was down almost 4 basis points on the

day at 1.885 percent as of 1639 GMT.

The proportion of index-linked gilts will fall by 2

percentage points to 21.1 percent.

The DMO chief executive, Robert Stheeman, told Reuters this

reflected concerns about the high level of linker issuance and

the potential longer-term risk they posed to taxpayers. By

contrast, there was no intention to shorten the average maturity

of conventional bond issuance .

ADM Investor Services analyst Marc Ostwald said the DMO's

new remit was no surprise and said gilts would probably continue

to track major bond markets until next week, when British and

European Union negotiators will work on a Brexit transition

agreement.

"It's all very contingent on what does happen next week.

That is definitely going to push at which way people are going

to look at the Bank of England," Ostwald said.

BoE (Shenzhen: 000725.SZ - news) interest rates are still expected to rise in May

following a barrage of hawkish signals from policymakers, but

most economists polled by Reuters last week don't see a

follow-up move for another year.

Ten-year gilt yields fell 1 basis point on the

day to 1.49 percent.

The yield spread between 10-year British and

German government bonds stood at 87.0 basis points,

little changed on the day.

June long gilt future 121.38 (+0.15)

June 2018 short sterling 99.18 (+0)

Dec (Shanghai: 600875.SS - news) 2018 short sterling 98.97 (+0)

10-year gilt yield 1.49 (-1 bps)

-------------------KEY MARKET DATA---------------------------

Long Gilt futures Gilt benchmark chain

Short Stg futures Cash market quotes

Deposit rates Sterling cross rates

UK debt speedguide

-------------------KEY MARKET REPORTS--------------------------

Gilts Sterling

Euro Debt Dollar

U.S. Treasuries Debt reports

--------------------GILT STRIPS DATA -------------------------

Gilt strips data All gilt strips

Gilt strips IO Gilt strips PO

($1 = 0.7149 pounds)

(Editing by Larry King)