Such views seemed a little odd this week. It might be November before the UK’s chancellor of the Exchequer makes his next Autumn Statement, but on Tuesday the country’s Debt Management Office made a pretty big autumn statement of its own.
The DMO’s 40th deal since introducing its syndication programme in 2009 drew the biggest book yet — nearly £22bn of orders for a £4.5bn July 2068, far outstripping its previous record of a £16.5bn book for a 30 year bond in June last year.
In September, there were even worries that the UK could “suffer” a “failed” auction. One of its auctions on June 2 had only recorded a bid to cover ratio of 1.19, for instance.
It is hard to see why this should be particularly worrying or a sign that the UK might not find a home for its debt. Germany has “suffered” several “failed” auctions this year, for instance.
“Failed” is a misnomer for an uncovered auction. If the UK — or any other issuer — sold a syndication that was not quite fully subscribed, it would not have “failed”. It might not have been a great deal, but it would not be a failure.
Far too much attention is given to auction bid to cover ratios. There are other, more important, factors to consider when gauging real underlying demand, such as the tail — the difference between the average and lowest accepted price.
Bond markets have been volatile this year, which could explain why the UK’s Gilt auction on June 2 had the lowest bid to cover ratio since 2009, while a few months later the DMO built its largest book since starting its syndication programme in — again — 2009.
A bit more understanding is needed before making grand assumptions around bid to cover ratios.
After all, no one likes a show-off.