U.K. ONE BILLION STG BOND ISSUE EXHAUSTED
A one billion stg issue of nine pct
Exchequer stock due 2002 which became available for trading
only this morning was exhausted in mid-afternoon trading on the
U.K. Government bond market, dealers said.
    The Bank of England said the issue was no longer operating
as a tap. The issue was announced Monday at a price of 96 stg
pct and dealers said the Government broker's supplies were sold
out this afternoon at a partly-paid 20-20/32 stg pct. The bonds
started trading this morning at 20 stg pct.
    Dealers noted the market had seen vigorous demand
throughout the day, prompted mainly by sterling strength.
    Dealers said that demand had been seen for the tap from
both domestic and overseas sources, including from Japan and
the U.S.
    Although the issue had not been designated as free of tax
to residents abroad (FOTRA) widespread bullish sentiment for
the market in general had generated foreign buying.
    The stock had been regarded as slightly expensive when it
was announced and dealers said that even first thing this
morning it had seemed slightly dear in relation to comparable
existing stocks.
    However, sterling's continuing firm performance had
prompted interest in the tap right at the outset.
    The issue's value had been enhanced by its partly-paid
structure, which not only enabled investors to defer payment of
the major part of the price until April 27, but also conferred
a substantial gearing element.
    This meant, dealers explained, that investors who bought
the bonds benefitted fully from price gains registered by the
market in general, although only 20 stg pct of the total
purchase price was tied up initially.
 REUTER
