UK 30-Year Green Bond Sale Sees Biggest Demand in Four Years

(Bloomberg) — A sale of UK green bonds Tuesday was oversubscribed by the most in four years, quelling concerns of a rout that last month saw gilts briefly head for their worst start to a year on record. 

The Debt Management Office’s offering of £2.5 billion ($3.1 billion) 30-year debt received £7.636 billion of bids — itself a record — as investors rushed to lock in high yields before the Bank of England is expected to start reversing the fastest series of interest-rate hikes in decades. 

Appetite for longer tenors already set an all-time high oversubscription rate for an offering of 20-year securities a month ago, and with the DMO not selling any more 30-year bonds this financial year, the opportunity to grab a large slice is rapidly diminishing. The BOE will be seeking to tap some of the demand by offloading long-maturity bonds in two operations tied to its quantitative tightening by the end of March.

Latest figures from the central bank show that foreign investors bought gilts in excess of £23 billion in December, the most in a year, while domestic accounts turned sellers for the first time in four months. 

Last month saw UK bonds slide after an unexpected surge in inflation prompted traders to reassess bets on when the BOE would cut interest rates. 

Yields on 30-year UK debt were one basis point lower at 4.61%, but remained close to a two-month high. Money markets are betting on three quarter-point interest-rate cuts this year with a 30% chance of a fourth. 

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