British bond dealers asked the government to issue a new 40-year gilt in the next fiscal year and to ramp up sales of existing long-dated debt to satisfy surging pension fund demand, the UK's issuer said on Wednesday according to Reuters. This year's annual meeting with officials attracted particular attention after yields on the DMO's groundbreaking 50-year inflation protected bond plunged to a record low last month, intensifying fears of a deepening black hole in Britain's pensions pot. Minutes of Wednesday's meeting showed dealers wanted next year's record gilt issuance skewed toward longer dated debt as pension funds, under pressure from new regulations, seek out assets to meet their long-term liabilities. "Many recommended the opening of new 40-year gilts, both conventional and index-linked," the minutes said. "There was general consensus for gilt issuance to be skewed towards long maturities in 2006-07." A 40-year gilt, which some dealers asked for a year ago, would be the first of its kind from Britain in nearly 30 years. Dealers said the new paper was needed to fill a gap between 30- and 50-year paper on Britain's inverted gilt curve. The DMO has a reputation for innovative issues. Last year it sold 50-year conventional gilts for the first time in four decades and months later it issued the longest index-linked government bond in the world -- a 50-year.
