HM Treasury News Release
36/98 19 March 1998
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1998-99 DEBT MANAGEMENT REPORT
The Debt Management Report for 1998-99 which sets out the
Government's debt management policy and gives details of the
Government's borrowing programme for 1998-99 was published
today by the Treasury.
The report includes the remits for the UK Debt Management
Office (DMO), which takes on responsibility for debt
management from 1 April 1998, following the decision to
transfer Government debt management responsibilities from the
Bank of England to the Treasury.
On publication of the report, Economic Secretary, Helen
Liddell said:
"This transfer of responsibility for debt management to
the new UK Debt Management completes the separation
between monetary policy and debt management policy,
whilst ensuring that the Government's issuance policy
remains one which is bases on openness, predictability
and transparency.
"Government economic policy will mean a move away from
the large borrowing requirements seen in the last few
years. Nevertheless there is continued emphasis in
reducing the debt interest bill through policies which
reduce gilt yields as well as the volume of borrowing.
"The Debt Management Office will continue with reforms to
achieve the Government's goal of improving the gilt
market wherever possible, following in the standards set
for them by the Bank of England. Reforms over the past
year have included the upgrading of the Central Gilts
Office and the launch of the strips market. This year we
intend to start auction index-linked gilts, following
recent consultation on the form of these auctions. This
represents a further improvement in the predictability
and transparency of the Government's debt issuance
programme."
The main features of the borrowing programme for 1998-99 are:
The financing requirement in 1998-99 is forecast to be
about 15.2 billion Pounds, made up of the central
government borrowing requirement, plus gilt redemptions,
less an adjustment to unwind the expected overshoot of
gilt sales in 1997-98. The financing requirement will be
met by assumed gross gilt sales of 14.2 billion Pounds
and gross sales of national Savings products of around 12
billion Pounds. Taking account of expected repayments and
accrued interest, the net national savings contribution
to the financing requirement is assumed to be 1 billion
Pounds.
In 1998-99, given the lower level of gilts sales
required, gilts issuance will be targeted to build up
maturity in the new ultra long (30 years) benchmark stock
and enable it to become strippable, and to sustain the
move to index-linked auctions. This means a temporary
increase in the proportions of index-linked issuance and,
within conventionals, in the proportion of long maturity
gilts. (Index-linked issuance and will account for 25 per
cent of total gilts sales, compared to 20 per cent in
1997-98. Within conventionals, shorts, mediums and longs
will be issued in portions of 25, 25, and 50 per cent
respectively, compared with 35, 30 and 35 per cent in
1997-98.) The Government does not intend following this
issuance mix for 1998-99 in future years, largely because
of the lengthening of the portfolio that such a mix would
imply.
Auctions of index-linked gilts will start in October
1998. This will allow sufficient time before then for the
DMO to establish a separate list of index-linked market
makers.
six auctions are scheduled in 1998-99, four for
conventional gilts and two for index-linked. Each auction
will be for one single stock. The auctions of
conventional gilts will be for between 2-3 billion Pounds
(nominal) of stock. The auctions of index-linked gilts
will be for between 1/2-1 billion Pounds(cash) of stock.
The DMO will not take over active cash management until
October 1998 at the earliest. Details of the proposed
cash management operations will be announced in due
course, along with any extension or adjustment to the DMO
remit that is necessary to cover those operations.
For this 1998 March Budget, the remit for the Audit of
the Budget Assumptions by the National Audit Office has
been widened to include two further assumptions, one of
which is that the funding assumptions which have been
used to project central government debt interest are
consistent with the forecast level of government
borrowing and with current financing policy as set out in
the Debt Management Report.
NOTES TO EDITORS
1. A copy of the 1998-99 Debt Management Report is attached.
As well as details of the 1998-99 borrowing programme, it
includes information on:
the size and structure of the national debt;
the Government's borrowing programme in 1997-98, and
development in the gilts market in 1997-98, and
those expected in 1998-99.
2. The 1998-99 Debt Management Report is the fourth report
in an annual series published in March of each year.
3. The National Audit Office Report on their Audit of
Assumptions for the Budget has been published today as
HC616. Copies are available from the Treasury Press
Office, and from the National Audit Office.
4. If you have access to the Internet, you can find the Debt
Management Report and news release and other Treasury
material at http://www.hm-treasury.gov.uk.