Jupiter comments on gilt issuance following the 2006 Budget

John Hamilton, manager of the Jupiter Corporate Bond Fund, believes that the Government's plan to increase the supply of longer-dated gilts will have a limited impact on the distortions in the sterling bond market.

"I do not expect the overall impact of the new arrangements for gilt issuance to have a significant impact on the current pension funding situation, because institutional demand is simply too great," said Hamilton.

Hamilton continued: "Clearly, the Chancellor has taken note of market concerns, but has not done anything particularly bold as a result. I would also point out that total overall gilt issuance of £63bn is lower than the market expectations of £65bn-£70bn.

The Chancellor has introduced a degree of flexibility in the pattern of funding over the fiscal year, which gives the Debt Management Office some ability to respond to market conditions.  In 2006/7 this could result in up to two thirds of total gilt issuance (conventionals and index-linked) being long-dated.  This compares to about half of total issuance in 2005/6 and is broadly in the range that the market had expected."