6 December 2011
The UK Debt Management Office has concluded its consultation on the possible issuance of CPI gilts (as we reported here).
As a result of this consultation, the DMO has announced that no CPI-linked gilts will be issued in 2012-13, though this does not preclude the issuance of such gilts in the medium term, should circumstances change.
The DMO gives four broad reasons for its decision:
- The concern that the introduction of CPI-linked gilts could detract from the liquidity of the existing RPI-linked market
- The uncertainty about potential future changes in CPI calculation methodology and the possibility of inclusion of owner-occupier housing in the CPI basket
- The ongoing legal challenges to the substitution of CPI for RPI in the statutory calculation of benefit increases
- The risk that potential investors elect to wait until a full CPI-linked market develops before participating : thus frustrating that development