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

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.

(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.

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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.

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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