News Release
Gilt-Edged Conversion Offer From 12% Exchequer Stock 2013-2017 Into 8% Treasury Stock 2015
27 November 96
The Bank of England announces the issue by Her Majesty's Treasury of GBP2,500 million of 7% Treasury Stock 2002, for auction on a fully paid bid price basis on Wednesday, 4 December 1996. The new issue will be strippable when an official gilt strips facility is introduced.
The CGBR forecast for 1996/97 has been revised in the November Budget from GBP28.1 bn to GBP27.9 bn. The assumption for the contribution from sales of National Savings products has been revised from GBP3 bn to £4.5 bn. The revised target for gilt sales during the rest of the year is set out below. There is no change to the Government's Remit to the Bank.
| £ bns | |
| CGBR forecast | 27.9 |
| Assumed increase in net official reserves | - |
| Gilt redemptions | 12.5 |
| Plus estimate for underfunding from 1995/96 | 2.2 |
| Financing requirement | 42.6 |
| Less: expected net inflow from National Savings | 4.5 |
| Certificates of Tax Deposit | -0.3 |
| Gilt sales required | 38.4 |
| Less: gilt sales made to end-October | 26.4 |
| Further gilt sales required November 1996-March 1997 | 11.9 |
Auction details: 7% Treasury Stock 2002
The GBP2,500 million of 7% Treasury Stock 2002 will be auctioned on a fully paid bid price basis on Wednesday, 4 December 1996.
Interest on 7% Treasury Stock 2002 is payable half-yearly on 7 June and 7 December. Interest on the stock will accrue from 5 December 1996 and the first interest payment will be made on 7 June 1997 at the rate of GBP3.5288 per £100 nominal of stock. The stock will be repaid at par on 7 June 2002. Interest payments will be paid to all holders of this stock without deduction of United Kingdom income tax.
Under Rule 2.3 of the London Stock Exchange, dealings in 7% Treasury Stock 2002 on a "when issued" basis may be conducted from the time of this announcement until the close of business on Wednesday, 4 December 1996. The SEDOL code to be used is 0-999-722. The EPIC code "AUC" should be used for trade reporting purposes.
The stock may be held on the National Savings Stock Register.
Bids may be made on either a competitive or a non-competitive basis.
(i) Competitive bids
The Bank of England reserves the right to reject any competitive bid or part of any competitive bid. 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 : competitive bids which are accepted and which are made at prices above the lowest accepted price will be satisfied in full; competitive bids which are accepted and which are made at the lowest accepted price may be satisfied in full or in part only.
Each competitive bid must be for one amount and at one price expressed as a multiple of 1/32nd of £1, and must be for a minimum of GBP500,000 nominal of stock. Unless the applicant is a member of the Central Gilts Office (CGO) Service, a CHAPS payment must be sent to the Bank of England to arrive not later than 1.30 pm on Thursday, 5 December 1996.
(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. 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 GBP1.
Only one non-competitive bid 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 GBP500,000 nominal of stock, and must be for a multiple of GBP1,000 nominal of stock.
Each gilt-edged market maker may bid non-competitively for up to 0.5% of the stock on offer.
Unless the applicant is a member of the CGO Service, the amount payable with non-competitive bids will be GBP102 for every £100 nominal of stock applied for. If the non-competitive sale price is less than GBP102 per GBP100 nominal of stock, the balance of the amount paid will be refunded. If the non-competitive sale price is greater than GBP102 per GBP100 nominal of stock, a further payment may be required.
A member of the CGO Service may, by completing Section 3 of the application form, request that any stock sold to him be credited direct to his account in the CGO on Thursday, 5 December 1996 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 the auction.
The prospectus 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 Wednesday, 4 December 1996 ; or lodged by hand at the Central Gilts & Moneymarkets Office, Bank of England, Threadneedle Street, London not later than 10.00 am on Wednesday, 4 December 1996 ; or lodged by hand at any of the Branches or Agencies of the Bank of England not later than 3.00 pm on Tuesday, 3 December 1996 . Bids will not be revocable between 10.00 am on Wednesday, 4 December 1996 and 10.00 am on Monday, 9 December 1996. Gilt-edged market makers may bid by telephone to the Bank of England not later than 10.00 am on Wednesday, 4 December 1996.
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, this stock is 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 H M 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 new stock issued this year, the first being Floating Rate Treasury Stock 2001 which was issued in June.
7% Treasury Stock 2002 is the sixth stock intended to be strippable when an official strips facility is introduced next year. The other stocks are 8% Treasury Stock 2000, 8½% Treasury Stock 2005, 7½% Treasury Stock 2006, 8% Treasury Stock 2015 and 8% Treasury Stock 2021. Interest payments on 7% Treasury Stock 2002 and the other stocks intended to be strippable will be payable to all holders without deduction of United Kingdom income tax from 7 June 1997. They will also be exempt from the quarterly accounting arrangements which were introduced in connection with the start of the gilt repo market.
The Bank has indicated that it will not sell stock in the maturity area surrounding the auction stock for a reasonable period after the auction, and will only do so if there is evident market demand for further such stock.
