Just days after the UK Debt Management Office stated that it would use syndication on a quarterly basis to distribute bonds, a 40-year gilt auction failed. Only £1.627 billion of bids were attracted to the £1.75 billion sale of the 2049 bond. The failure was attributed to a sudden turnaround in investor sentiment for gilts and a function of the distortion caused by the Bank of England’s quantitative easing. The last failed auction took place in 2002.
Gilt traders said that the ambiguous commitment that Bank of England governor Mervyn King gave to quantitative easing took the wind out of the market’s sails.
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