Debate in London on the method of issuing government bonds

Posted on Dec. 2020 at 12:00

The letter left last month, but its contents were not revealed until this week. The chairman of the highly influential Treasury Committee of the British parliament – Mel Stride – is asking the chairman of the Debt Management Office (DMO), the agency in charge of placing the UK’s debt on the markets, to account, as reported by ” Financial Times ”. The parliamentarian is moved by the way the DMO has issued Gilts – British government bonds – over the past 10 years.

He points to the 70 or so operations carried out by syndication, for a total amount of 301 billion pounds sterling over the period. States have two ways of investing their debt. The first, the auction, is based on an auction principle. The borrowing Treasury gives an indication of the amount it wishes to raise and asks its partner banks (primary dealers or SVTs in France) to make offers to it. They undertake to buy the debt themselves and then replace it in the markets. Competition between institutions thus tends to drive up bond prices, and therefore to lower the yield that will be demanded from the State. It is therefore widely favored by Treasuries, including that of the United Kingdom.

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