UK T-Bills: Not a Magic Bullet for Gilts

Goldman Sachs analyzes the UK DMO's plans to expand the T-bill market, concluding that while it offers modest cost savings, it increases funding volatility and has limited impact on Gilt risk premiums.

Key Takeaways

• 1.The UK DMO is introducing measures to increase T-bill usage, including 12-month bill weekly tenders and a Standing Repo Facility.
• 2.Increasing the UK T-bill share to 10% could save approximately £3bn per year but would increase funding volatility due to lower weighted-average maturity (WAM).
• 3.A higher T-bill share may tighten Gilt-swap spreads by 5-10bp by reducing long-end Gilt issuance.

Table of Contents

• From cash management to debt management
• Modest cost savings from higher T-bill share
• Who will buy UK T-bills?
• Market Implications

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