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United Kingdom : UK DMO Likely To Open Syndicated 2040 IL Gilt On July 27.

The U.K.'s Debt Management Office (DMO) is likely to open books for its syndicated re-opening of the 0.625% 2040 index-linked Gilt on Tuesday, July 27, market sources familiar with the deal told.

The source notes that the syndicated 2040 IL Gilt is likely to be priced as well on Tuesday, as the event calendar is busy mid-week; The Bank of England Governor Mervyn King, along with Monetary Policy Committee members Charles Bean, Paul Fisher, Paul Tucker, David Miles and Andrew Sentance are all due to testify on the May inflation report before the Parliament's Treasury Select Committee on Wednesday.

One source told MNI that the likely size range for the forthcoming 2040 IL Gilt deal is stg3.0 billion to stg3.5 billion.

Another source added that if the issue size comes in larger than Stg3.5 billion, then the DMO may consider cancelling its next syndicated long-dated conventional or an index-linked Gilt that is planned in the second half of September. This would be possible as the debt agency will be well ahead of the supplementary part of its issuance programme.

So far, the DMO has sold Stg4.0 billion in syndicated linker sales out of the planned Stg13.2 billion, which implies it needs to raise Stg9.2 billion. In conventional Gilts, the DMO only needs to raise Stg4.8 billion after it sold a record Stg8.0 billion amount in its last syndicated new 2040 Gilt issue.

The DMO has previously indicted that it envisages holding up to eight syndicated offerings in FY2010-11 (including syndications already held/announced). The 2040 IL Gilt will be third syndicated offering in FY2010/11 and the second index-linked deal. In its financing remit for 2010/11, the DMO has said that "auctions will remain the Government's primary method by which to issue Gilts" and it "will consult, with market participants, on plans for syndications in the quarterly consultation meetings throughout the year and will announce its intention to hold such operations, subject to market conditions, in its quarterly issuance announcements".

Traders add that the DMO may want to hold back its remaining syndicated Gilt offerings as October to December quarter is considered to be traditionally the strongest period for demand in long dated Gilts.

The sale of the syndicated linker this week would not be a surprise to the market, as debt agency had previously said it expected the sale would take place in the week commencing 26 July 2010, subject to market and demand conditions.

The DMO has appointed Deutsche Bank, Goldman Sachs International. HSBC Bank place and the Royal Bank of Scotland as joint lead managers and all other Gilt-edged Market Makers have been invited to be co-leads to the deal.

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Date:Jul 26, 2010
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