The Ministry of Finance carried out its first issues of government securities of the year on February 14th with an offering of six-month Treasury bills and three-year bonds. This follows the inaugural offering of five tranches of securities at the end of 2010 (January 2011, Economic policy). The ministry has also published a schedule for issuing T-bills and bonds for the whole of 2011. The total amount of these government securities is S£30bn (US$650m), of which S£27bn will be bonds with maturities ranging from one year to five years, and the remainder in bills ranging from three to nine months.

According to the schedule, the ministry's original aim was to raise S£1bn in six-month bills and S£2bn in three-year bonds from the February issuance. Both issues were oversubscribed, each attracting offers of S£2.5bn. For the six-month bills, five banks submitted bids with proposed yields ranging from 0.6% to 3.75%. The ministry decided to allocate S£1bn of bills at 1%. Four offers were made for the three-year tranche, with rates between 1.6% and 4.5%; the ministry clearly judged some of the offers to be too highly priced, as it only issued S£1.7bn worth of bills, with a yield of 2.72%. In the previous issues in December, the rates agreed were 0.6% on the six-month bills and 1.94% for the three-year paper-although in both cases the top rates quoted by the bidding banks were higher. Private banks have tended to quote higher rates than those offered by state-owned banks, and have consequently failed to secure significant allocations from the issues so far. However, private bankers have generally welcomed the government's initiative, as it promises to provide a wider range of tradable instruments in which they can invest their relatively abundant liquidity.

Download the numbers in Excel