News Release
UK Government Euro and ECU Treasury Bills: Announcement of Tender and Publication of Information Memorandum
07 July 1998
The Bank of England has today published a UK Government Euro Treasury Bill Information Memorandum. This sets out the arrangements for issuing Treasury Bills denominated in euro and represents a continuation of the UK Government's existing ECU Bill programme. Bills with maturity dates after the start of 1999 will be issued as Euro Bills under this new Information Memorandum, while Bills with maturity dates before the end of 1998 will continue to be issued as ECU Bills under the earlier ECU Treasury Bill Information Memorandum. Copies of the Euro Treasury Bill Information Memorandum and the ECU Treasury Bill Information Memorandum are available from the Manager, External Debt, Foreign Exchange Division, Bank of England (+44 171 601 5982), on request.
The Bank of England also announces the issue by Her Majesty's Treasury of Euro 300 million nominal of UK Government Euro Treasury Bills and ECU 700 million nominal of UK Government ECU Treasury Bills, for tender on a bid-yield basis on Tuesday, 14 July 1998 in the following maturities:
ECU 200 million of ECU Bills for maturity on 13 August 1998,
ECU 500 million of ECU Bills for maturity on 15 October 1998, and
Euro 300 million of Euro Bills for maturity on 14 January 1999.
An additional Euro 50 million nominal of six-month Bills, maturing on 14 January 1999, will be allotted directly to the Bank of England for the account of the Exchange Equalisation Account.
The main aspects in which the Euro Bill Information Memorandum differs from the earlier ECU Bill Information Memorandum are as follows:
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Bills issued under the Euro Bill Information Memorandum will be for maturities after 1 January 1999 and will be denominated in euro.
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Once Stage 3 of EMU begins, all 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 repayments of principal would also be in ECU at a rate of 1 ECU for 1 euro. (In fact, no repayments will fall due on any Euro Bills before the scheduled Stage 3 start date of 1 January 1999.)
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In line with market recommendations, 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.
The day-count convention for calculating yields on Euro Bills will be 'Actual/360' days, which is the same as it is for ECU Bills. This approach is consistent with market recommendations on the day- count convention for euro money-market instruments.
Notes for Editors
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This Euro Bill programme represents the continuation of the ECU Bill programme which has been running for almost 10 years. There are currently ECU 3.5 bn of Bills outstanding with the public. There are twenty market makers, which are listed on page 11 of the new Information Memorandum. Tenders for Bills are held monthly; the first took place in October 1988. The size and maturity of issues are normally announced a week before tenders are held.
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The Euro Bill Information Memorandum is being issued today because the issue of six-month Bills announced today will be the first issue to mature after the scheduled Stage 3 start date of 1 January 1999.
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UK Government Euro Treasury Bills and ECU Treasury Bills are similar in form to sterling Treasury Bills, but denominated in either euro or ECU respectively. The form is governed by the Treasury Bills Act 1877 and the Treasury Bills Regulations 1968 as amended, and amendments to those Regulations came into force on 6 July 1998 to set out the form of Euro Treasury Bills. This form is described in the new Euro Information Memorandum.
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European Council Regulation (EC) No. 1103/97 (often referred to as "the Article 235 Regulation") already states that references to the official ECU in legal instruments will be replaced by references to the euro at a rate of one euro for one ECU. The Regulation also establishes a presumption that references in legal instruments to the ECU without a definition as the official ECU will similarly 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 Bill Information Memorandum is intended to remove any remaining market doubt in this respect.
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On 13 January 1998 the Bank of England published a new Euro Note Information Memorandum which represented a continuation of the ECU Note programme initiated in 1992, and was similarly intended to remove any remaining market doubt that Notes would be repaid in euro. Copies of that Euro Note Information Memorandum and subsequent supplements are available from the the Manager, External Debt, Foreign Exchange Division, Bank of England (+44 171 601 5982). It is presently contemplated that further tranches of the 4.25% Euro Note maturing on 29 January 2001 will be sold in tenders on 21 July 1998 and 20 October 1998.
