Long-dated gilt yields dive below short-dated ones at auction

Long-dated government bond frenzy continues in the UK bond market and that has led to something you don’t see every day. The demand is so high that investors bought £1.25 billion long-dated gilts at an average yield of 1.214 percent with a maturity in 2055. This means that the40-yearr bond yielded less than the 30-year bond. Currently the 30 year bond is trading at 1.34 percent yield in the secondary market.

The demand seems to be very high from the insurance and the pension funds, which were reluctant to sell the Bank of England (BoE) long dated bonds last week and the offer auction, fell short of its target by £52 million.

From now on, the Bank of England will be purchasing long dated gilts on every Tuesday for next six months and short dated ones on every Monday and Wednesday. These three days are must watch UK bond market days.

Both 40-year and 50-year bond in the market is now yielding below 30-year in the secondary market.