Halister News

(Bloomberg) -- Lack of gilt supply in the coming two weeks plus upcoming cash flows, index events should keep the recent gilt outperformance on track, writes RBC Strategist Vatsala Datta in a note Wednesday.

• Expects gilts to outperform USTs in the short term due to supply dynamics; also likely to outperform in the medium term as BOE finding it hard to increase rates with the risk of Brexit looming
• Positive cash-flow dynamics in the near term; UKT 8.75% Aug. 2017 will redeem Aug. 25, which extends FTSE All Stocks index by 0.06y with index re-balancing to be done by the close of business Aug. 24
• 17 conventional gilts will pay coupons worth GBP8b on Sept. 7, with GBP4.3b to be returned to private sector (ex-BOE holdings); this will extend FTSE All Stocks Index by 0.06y and will take effect at close of business Aug. 25
• UKT 1% Sept. 2017 conventional will mature on Sept. 7; will extend FTSE All Stocks Index by 0.27yr, takes effect at close of business Sept. 6
  • Also Sept. 7: UKT 3.75% Sept. 2020 will roll sub-3yr and will become ineligible for further APF purchases after this date; this is most likely the reason why the bond has been under relative pressure of late

To contact the reporter on this story: Conor Molumby in London at cmolumby@bloomberg.net To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net; Ven Ram at vram1@bloomberg.net Stephen Spratt