Case study

Helping UK DMO issue its final syndication for 2022-23 remit

26 Jan 2023 . 3 min read

The DMO – the Executive Agency of HM Treasury

Established in 1998, UK Debt Management Office (DMO) is an executive agency of HM Treasury (HMT). The Chancellor of the Exchequer determines the policy and financial framework within which the DMO operates, and delegates operational decisions to the Chief Executive. The DMO is responsible for debt and cash management for the UK Government, lending to local authorities and managing certain public sector funds.

Strong demand from high-quality investors allows bond size to be set at £6bn

Planning to issue a new 30-year bond, the DMO mandated NatWest as Joint Bookrunner for the transaction – following our Joint Lead Manager role for their October 2073 re-opening, which was syndicated in June 2022.

Investor demand for the new bond was strong from the outset, with 215 orders coming in. Based on the order volume, the DMO set the size at £6.0 billion. As a result of this sizing, the DMO transferred £1.0 billion from the unallocated portion of the issuance to the long conventional syndication programme, increasing the size of that programme to £17.3 billion and reducing the residual balance in the unallocated portion of issuance to £481 million.

The 30-year issuance, which carries an annual coupon of 3.750%, marked both the DMO’s first syndication of the 2023 calendar year and the last syndication of its 2022-23 remit. It will take the DMO’s outturn for syndication proceeds in this financial year to £24.0 billion.

NatWest teams deliver for core issuers with One Bank approach

Sir Robert Stheeman, Chief Executive of the DMO, commented: “I am very pleased to say that our syndication programme for 2022-23 has concluded on an extremely strong note. Today we were able to launch a new current coupon 30-year gilt, which is intended to become a future benchmark at this key maturity, in the large size of £6.0 billion nominal, representing approximately £1.0 billion more than our initial planning assumption. This highly successful launch has been possible thanks to significant support from our core investor base whose commitment to the gilt market was manifested in a large and high-quality order book. I am also pleased that the transaction was once again smoothly executed and well received by the market.”

Kerr Finlayson, Head of FBG Syndicate at NatWest, added: “We’re delighted to have been able to support the DMO again, and we’re proud to have been the only bank to act as Joint Lead Manager for this £6 billion 30-year bond as well as the EU’s €5 billion 30-year transaction this week. Both issuances were the first real test for duration in the SSA market this year, with both deals marking the longest maturities issued in their respective currencies, year to date; investors’ demand has proven that there is strong appetite for long-dated bonds. Supporting these two core issuers is a prime example of multiple NatWest teams working together as One Bank to deliver the best outcome for our customers.”

Dislcaimer

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