LIVE MARKETS-Lessons for the euro zone from Britain's budget

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LESSONS FOR THE EURO ZONE FROM BRITAIN'S BUDGET

Longer-dated British government bonds or gilts were the big winner from Wednesday's budget announcement, with the 30 year yield falling by the most in a day since April. Analysts at ING reckon this is something euro zone countries should be watching. GB30YT=RR

The gilt rally, because of course yields move inversely to prices, is partly to do with the budget itself, but mostly to do with the simple fact that Britain's Debt Management Office is going to issue fewer of them.

The share of long gilt issuance is down to just 9.5% compared to 20% in last year’s budget and above 30% in 2021.

That's necessary, ING say, because there are fewer defined benefit pension schemes in the UK than there were, and so there is less demand for super long dated gilts.

The euro zone has pretty much exactly the same problem, especially with Dutch pension reforms in the mix.

And so ING argue euro zone should "learn from the UK’s decision to shorten maturities," and contemplate reducing issuance of 30 year bonds to respond to the reduced demand.

(Alun John)

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