News Release
UK Government Euro Treasury Notes: Announcement of Tender and Publication of Informantion Memorandum
13 January 1998
The Bank of England has today published a UK Government Euro Treasury Note Information Memorandum. This converts the denomination of the UK Government ECU Note programme into euro, and replaces the ECU Note Information Memorandum issued in 1996. Copies of the Information Memorandum are available from the Bank of England on request.
The Bank also announces a tender for Euro500 million nominal of UK Government Euro Treasury Notes to be issued on Thursday 29 January 1998 and to mature on Monday 29 January 2001. The tender, which will be on a bid-yield basis, will take place on Tuesday 20 January 1998. An additional Euro50 million of Notes will be allotted directly to the Bank for the account of the Exchange Equalisation Account, and will be available for sale and repurchase operations with market makers. A copy of the tender notice published by the Bank is attached.
It is presently contemplated that further tranches of Notes maturing in 2001 will be sold in subsequent quarterly tenders in 1998, to be held on the third Tuesday of the first month of each quarter. The remaining tender dates for 1998 would thus be:
21 April 1998
21 July 1998
20 October 1998.
The amount and maturity of the Notes to be offered at each future tender will be announced at least four business days in advance of each tender.
The main aspects in which the Euro Note Information Memorandum differs from the earlier ECU Note Information Memorandum are as follows:
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Notes issued in future under the programme (including those in the tender announced today) will be denominated in euro.
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Once Stage 3 of EMU begins, all payments of interest and repayments of principal will be made in euro.
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Before Stage 3 begins, all payments at tender will be made in ECU at a rate of 1 ECU for 1 euro. During this period, any payments of interest and repayments of principal would also be in ECU at a rate of 1 ECU for 1 euro. (In fact, no interest or payments will fall due on any Euro Notes before the scheduled Stage 3 start date of 1 January 1999.)
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The day-count convention for calculating interest on the Notes will initially be ‘30/360’ days, as it is for international ECU bonds at present, but will change to an ‘Actual/Actual’ day-count at the first interest payment date after Stage 3 begins. This approach follows market recommendations for the euro market, and the Bank anticipates that the market will therefore calculate yields on a ‘30/360’ basis until the first interest payment, and on an ‘Actual/Actual’ basis thereafter.
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Similarly, in line with market recommendations, interest and principal payments in euro will be made on any due date when TARGET is open to make payments to the account nominated by the investor.
Payments of interest and repayments of principal on all currently outstanding UK Government ECU securities which become due after Stage 3 begins will also be made in euro at a rate of 1 euro for 1 ECU. However, until Stage 3 begins, these securities will remain denominated in ECU, and their day-count conventions for accrued interest will remain ‘30/360’ throughout their life, in line with the Terms and Conditions under which they were issued.
The new Information Memorandum also contains a revised list of market makers, which includes the addition of two firms to the list:
BNP Finance, and
Commerzbank AG.
The Bank will be consulting market makers in both this Note Programme and the ECU Bill Programme on the possibility of introducing in the next few months a facility allowing them to bid at tenders by telephone. Tenders would still be open also to anyone who wished to apply by the current method of delivery by hand of application forms to the Bank.
Notes for Editors:
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This Euro Note Programme represents the continuation of the ECU Note Programme initiated in 1992. ECU 2,000 million of each of the first two series of Notes, maturing in January 1995 and 1996 respectively, were sold by tender in 1992 and 1993 and ECU 2,500 million of the third series of Notes, maturing in January 1997, was sold by tender during 1994. ECU 2,000 million of each of the fourth, fifth and sixth series of Notes, maturing in January 1998, 1999 and 2000 respectively, were sold by tender in 1995, 1996 and 1997.
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European Council Regulation (EC) No. 1103/97 (often referred to as "the Article 235 Regulation") already establishes a presumption that references to the ECU in legal instruments will be replaced by references to the euro at a rate of one euro to one ECU, unless this presumption is rebuttable taking into account the intentions of the parties. In accordance with this Regulation, the UK Government already has an obligation to repay ECU debt one for one in euro after Stage 3 begins. The new Euro Note Information Memorandum and the statement contained in this press notice concerning repayment of existing ECU debt in euro in Stage 3 are intended to remove any remaining market doubt in this respect.
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The change of the day-count convention on the first interest payment date in Stage 3 which is provided for in the Euro Note Information Memorandum is in line with the approach suggested by the International Primary Markets Association.
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The telephone bidding facility on which the Bank will be consulting market makers is envisaged as being similar to that already used for auctions of gilt-edged securities.
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The arrangements for the UK Government ECU Bill programme which is referred to in this press notice are described in an Information Memorandum issued on 28 March 1989 and subsequent supplements. The schedule of dates for ECU Bill tenders in 1998 was described in a Bank press notice dated 6 January 1998.
Key Resources
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Tender Notice Download PDF |
