UK to auction £1.7 billion of index-linked treasury gilt

The UK Debt Management Office (DMO) will auction £1.7 billion of 1⅛% Index-linked Treasury Gilt 2035 on June 24, 2025, increasing the total nominal outstanding to £7,052.3 million. The auction follows a uniform price bidding convention and includes a post-auction option facility for an additional 25% of the nominal amount; however, applications from the Approved Group of Investors will not be accepted.

Analysis

The UK Debt Management Office (DMO) has announced a forthcoming auction of £1.7 billion of the 1⅛% Index-linked Treasury Gilt maturing on September 22, 2035, scheduled for June 24, 2025. This issuance will be fungible with existing tranches, increasing the total nominal outstanding of this specific Gilt to £7,052.3 million, or £7,231.6 million on an index-adjusted basis. The auction will utilize a uniform price bidding convention, and a post-auction option facility could further expand the issuance by up to 25% of the nominal amount allocated. Notably, applications from the DMO's Approved Group of Investors will not be accepted for this particular auction. Investors will pay an index-adjusted accrued interest of £0.463518360801 per £100 nominal, with the reference index for the first issue date being 390.88065 (as of January 29, 2025) and an index ratio of 1.02543 at the settlement date. The neutral sentiment and low market impact score (0.25) associated with this announcement suggest it is perceived as a routine market operation, consistent with ongoing sovereign debt management.

Key Decisions for Investors

• Investors focused on UK inflation-linked bonds should note the increased supply of the 2035 Gilt, which may marginally influence secondary market pricing for this specific maturity.
• Potential auction participants should be aware of the exclusion of the Approved Group of Investors for this event, which could alter typical bidding dynamics, and factor in the uniform pricing mechanism and post-auction option facility when formulating bidding strategies.
• Holders and prospective buyers of UK index-linked Gilts should evaluate the terms of this specific 1⅛% 2035 Gilt, including its current index ratio and accrued interest, in the context of their inflation expectations and portfolio construction.