M&G's Leaviss: 'Huge wave' of new issuance is set to weaken UK gilts further

Issues around debt sustainability

UK gilts are set to continue underperforming as a result of a “huge wave” of new government issuance to fund Liz Truss’ £150bn energy package, said Jim Leaviss, chief investment officer for public fixed income at M&G.

Under plans announced last Thursday (8 September), the government will spend about £150bn to cap energy costs at £2,500 for an average household for two years, which is expected to be borrowed from the bond markets.  The Bank of England has also announced plans to sell £10bn of the gilts it owns every quarter under plans to shrink its swollen balance sheet by £80bn a year, with the remainder coming through passive quantitative tightening, although Bailey said last week that this could be revised in light of the government's energy bill rescue scheme.  Bank of England gilt sales 'unlik...