UK’s ‘More Ambitious’ Debt Office Gives Some Respite to Reeves.

UK Chancellor of the Exchequer Rachel Reeves likely owes some gratitude to her debt office, which was lauded by analysts for its approach to lowering borrowing cost.

Markets were jittery as Reeves laid our her fiscal plans on Wednesday, with bond yields edging higher. But as she wrapped up her statement and the Debt Management Office unveiled how it would fund the measures, long-term borrowing costs sank more than 10 basis points, sidestepping the gilt selloff headlines that followed Reeves’ October budget.

The DMO, which operates with a staff of around 130 in a separate office from Reeves’ Treasury, surprised investors by tilting bond sales away from long-maturity bonds more aggressively than any bank surveyed.

The DMO, which is led by chief executive Jessica Pulay, cut the proportion of proposed long-dated sales to 13.4%, compared with 18.5% in the equivalent announcement a year ago. That’s the smallest proportion in a Spring statement in the DMO’s 27-year history.

The shift accelerated a trend of the past years, as the DMO adjusts to waning demand from defined-benefit pension funds, which have traditionally propped up the market with near-insatiable buying. While the market expected that strategy to persist, the office exceeded all expectations.

Source: Finance.Yahoo