Chancellor steps up £7bn gilts auction to meet demand

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The Independent Online

The Chancellor of the Exchequer, Gordon Brown, yesterday announced two more government bond (gilt) issues as the Investment Management Association (IMA) revealed that investors were still keen to add to their holdings of bonds.

The Debt Management Office (DMO), which orchestrates gilt sales for the Treasury, said that on 23 September it would launch an index-linked stock paying 2 per cent and repayable in 2035. Two days later it intends to sell another, unspecified stock due to be repaid in 2015. These issues will form part of the £7.4bn sales programme the Chancellor announced in April's Budget.

The DMO has already said on 2 July it will sell another tranche of a 4.25 per cent gilt due in 2036, and a fortnight later a 2.5 percent index-linked stock maturing in 2013. Also, on 29 July, the DMO will sell 5 per cent bonds due in 2014 and, on 14 August, a 4 per cent gilt to be repaid in 2009.

The IMA said yesterday that in May corporate bonds were once again the most popular fund category, registering gross investment of £593m. Second were UK All Companies funds, at £442m.

But the overall monthly figures showed that gross retail investment fell by £370m to £2.2bn from April, and was £500m down on a year ago. But the industry drew comfort from the fact that repurchases - cashing in by the public - also fell, at £1.5bn for May, £60m down on April and £410m down on May last year. Gross institutional investment fell from £2bn in April to £1.2bn in May, while repurchases fell from £1.3bn to £1.1bn.

Total investment funds under management in May were £210bn, the highest since June last year.

Richard Saunders, the IMA's chief executive, said: "May's figures continue the trend of recent months, with net sales running behind this time last year, but by much less than was the case in January this year. Corporate bond funds continue to be the most popular with retail investors, as they have been for the last year."

Intermediaries continued to be the most popular distribution channel for retail gross sales in May, accounting for 63 per cent of investment by individuals.