News Release
Gilt-Edged Auctions
22 October 1996: £2,000 million 7% Treasury Stock 2001
24 October 1996: £1,500 million 8% Treasury Stock 2015
15 October 1996
The Bank of England announces the issue by Her Majesty's Treasury of a further £2,000 million of 7% Treasury Stock 2001 ("7TY2001") and a further £1,500 million of 8% Treasury Stock 2015 ("8TY2015"), for auction on a bid price basis on Tuesday, 22 October 1996 and Thursday, 24 October 1996 respectively. The new issues will be fully paid and fungible with the relevant stock already in issue. The further amount of 8TY2015 will be strippable when an official gilt strips facility is introduced.
Interest on 7TY2001 is payable half-yearly on 6 May and 6 November. Interest on 8TY2015 is payable half-yearly on 7 June and 7 December. These further issues of stock will rank in all respects pari passu with the existing stocks, and will be amalgamated with them immediately on issue. The prices payable for these stocks will include an amount equal to accrued interest from their respective last interest payment dates, 6 May 1996 in the case of 7TY2001 and 7 June 1996 in the case of 8TY2015, until the settlement of the further issues of stock. This amount in respect of 7TY2001 (settlement date 23 October 1996) will be at the rate of £3.26027 per £100 nominal of stock, and in respect of 8TY2015 (settlement date 25 October 1996) at the rate of £3.06849 per £100 nominal of stock. These further issues of stock will rank for the full six months' interest due on their respective next interest payment dates, 6 November 1996 in the case of 7TY2001 and 7 December 1996 in the case of 8TY2015. 7TY2001 will be repaid at par on 6 November 2001 and 8TY2015 will be repaid at par on 7 December 2015. The prospectus for each issue includes provision for exemption from United Kingdom taxation in favour of non-resident holders. As announced on 13 August 1996, interest payments will be made to all holders of gilts intended to be strippable, which includes 8TY2015, without deduction of United Kingdom income tax with effect from 7 June 1997.
The stocks may be held on the National Savings Stock Register.
Bids may be made on either a competitive or a non-competitive basis. An applicant may bid for either or both stocks.
Under Rule 2.3 of the London Stock Exchange, dealings in these further issues on a "when issued" basis may be conducted from the time of this announcement until the close of business on Tuesday, 22 October 1996 for 7TY2001 using SEDOL code 0-999-744, and until the close of business on Thursday 24 October 1996 for 8TY2015 using SEDOL code 0-999-733. The SEDOL codes to be used after these dates are those for the existing issues, ie 0-892-058 for 7TY2001 and 0-888-154 for 8TY2015. For trade reporting purposes, the EPIC code "AUC" should be used for 7TY2001 and "AUCA" for 8TY2015.
Method of application for 7TY2001 and 8TY2015
(i) Competitive bids
The Bank of England reserves the right to reject any competitive bid or part of any competitive bid. For each stock, competitive bids will be ranked in descending order of price and stock will be sold to applicants whose competitive bids are at or above the lowest price at which the Bank of England decides that any competitive bid should be accepted (the lowest accepted price).
Applicants whose competitive bids are accepted will purchase stock at the prices which they bid (plus accrued interest) : competitive bids which are accepted and which are made at prices above the lowest accepted price will be satisfied in full; competitive bids made at the lowest accepted price may be satisfied in full or in part only.
For each stock, each competitive bid must be for one amount and at one price, excluding accrued interest, expressed as a multiple of 1/32nd of £1, and must be for a minimum of £500,000 nominal of stock. Unless the applicant is a member of the Central GiltsOffice (CGO) Service, a CHAPS payment must be sent to the Bank of England to arrive not later than 1.30 pm on Wednesday, 23 October 1996 for 7TY2001 and not later than 1.30 pm on Friday, 25 October 1996 for 8TY2015.
(ii) Non-competitive bids
The Bank of England reserves the right to reject any non-competitive bid. Non-competitive bids which are accepted will be accepted in full at the non-competitive sale price plus accrued interest relevant to that stock. For each stock, the non- competitive sale price will be equal to the weighted average of the prices at which competitive bids have been accepted, rounded down to the nearest multiple of 1/32nd of £1 .
Only one non-competitive bid per stock may be submitted for the benefit of any one person; a non-competitive bid, other than one made by a gilt-edged market maker, must be for not less than £1,000 nominal and not more than £500,000 nominal of stock, and must be for a multiple of £1,000 nominal of stock.
Each gilt-edged market maker may bid non-competitively for up to 0.5% of the nominal amount of each stock on offer.
Unless the applicant is a member of the CGO Service, the amount payable with non-competitive bids for 7TY2001 will be £107 for every £100 nominal of stock applied for and the amount payable with non-competitive bids for 8TY2015 will be £108 for every £100 nominal of stock applied for. If the relevant non-competitive sale price, plus accrued interest, is less than the amount payable on application, the balance of the amount paid will be refunded. If the relevant non-competitive sale price, plus accrued interest, is greater than the amount payable on application, a further payment may be required.
A member of the CGO Service may, by completing Section 3 of the relevant application form, request that stock sold to him be credited direct to his account in the CGO on Wednesday, 23 October 1996 in the case of 7TY2001 and on Friday, 25 October 1996 in the case of 8TY2015, by means of a member-to-member delivery.
The Bank of England reserves the right to require evidence of the identity of any applicant for stock or of any person for whom an applicant is acting as agent. In addition, if, for whatever reason, such evidence of identity is not provided within 21 days after the auction, the Bank of England may reject the application or cancel the sale of any stock, and take any other action it may think fit.
Cancellation of a sale of stock will not affect the non-competitive sale price or any other sale of stock.
The Bank of England may sell less than the full amount of the stock on offer at each auction.
The prospectuses for competitive bids and non-competitive bids will be advertised in the Press. Application forms must be sent to the Bank of England, New Issues, PO Box 444, Gloucester, GL1 1NP to arrive not later than 10.00 am on Tuesday, 22 October 1996 in the case of 7TY2001 and 10.00 am on Thursday, 24 October 1996 in the case of 8TY2015 ; or lodged by hand at the Central Gilts & Moneymarkets Office, Bank of England, Threadneedle Street, London not later than 10.00 am on Tuesday, 22 October 1996 for 7TY2001 and 10.00 am on Thursday, 24 October 1996 for 8TY2015 ; or lodged by hand at any of the Branches or Agencies of the Bank of England not later than 3.00 pm on Monday, 21 October 1996 for 7TY2001 and 3.00 pm on Wednesday, 23 October 1996 for 8TY2015 . Bids will not be revocable between 10.00 am on Tuesday, 22 October 1996 and 10.00 am on Friday, 25 October 1996 for 7TY2001 and between 10.00 am on Thursday, 24 October 1996 and 10.00 am on Tuesday, 29 October 1996 for 8TY2015. Gilt-edged market makers may bid, competitively and non-competitively, by telephone to the Bank of England not later than 10.00 am on Tuesday, 22 October 1996 for 7TY2001 and 10.00 am on Thursday, 24 October 1996 for 8TY2015.
Government Statement
Attention is drawn to the statement issued by Her Majesty's Treasury on 29 May 1985 which explained that, in the interest of the orderly conduct of fiscal policy, neither Her Majesty's Government nor the Bank of England or their respective servants or agents undertake to disclose tax changes decided on but not yet announced, even where they may specifically affect the terms on which, or the conditions under which, these stocks are issued or sold by or on behalf of the Government or the Bank; that no responsibility can therefore be accepted for any omission to make such disclosure; and that such omission shall neither render any transaction liable to be set aside nor give rise to any claim for compensation.
Note To Editors
In accordance with HM Government's financing Remit to the Bank, issued on 27 March 1996, eleven auction sales are planned during the financial year 1996-97. Today's notice provides details of the second dual stock auction of the year, the first having been held in July; a further dual stock auction is planned for January 1997.
The £2,000 million issue of 7% Treasury Stock 2001 is fully paid and, from 23 October 1996, will be indistinguishable from the £10,750 million already in issue. This means that successful bidders at the auction will pay for the interest which has accrued since the last interest payment on 6 May 1996, at the rate of £3.26027 per £100 nominal of stock; and also that the full six months' interest will be due to them on 6 November 1996.
Similarly, the £1,500 million issue of 8% Treasury Stock 2015 is fully paid and, from 25 October 1996, will be indistinguishable from the £11,000 million already in issue. This means that successful bidders at the auction will pay for the interest which has accrued since the last interest payment on 7 June 1996, at the rate of £3.06849 per £100 nominal of stock; and also that the full six months' interest will be due to them on 7 December 1996.
It was announced on 13 August 1996 that interest payments due to be made on 7 June 1997 and thereafter on gilts intended to be strippable when a strips facility is introduced will be paid without deduction of United Kingdom income tax. They will also be exempt from the quarterly accounting arrangements which were introduced in connection with the start of the gilt repo market. This includes 8% Treasury Stock 2015.
The Bank has indicated that it will not sell stock in the maturity area surrounding auction stocks for a reasonable period after the auctions, and will do so only if there is evident market demand for further such stock.
