Mystery Investors Amass Billions in Gilts as Brexit Is Triggered
(Bloomberg) -- Some mystery investors are betting big on gilts as the U.K. prepares to leave the European Union.
The investors have taken delivery of a record 38,271 futures contracts that expired on Wednesday, the day Prime Minister Theresa May triggered Article 50. The number of contracts, which represents 3.8 billion pounds ($4.7 billion) worth of 10-year bonds, is the highest in ICE data going back to 2007 and compares with an average of about 8,000 a month.
The buyers may be betting that gilts will rally as the U.K. economy navigates the twists and turns of a prolonged Brexit negotiation process.
The limited free-float of bonds deliverable against the contracts may have led to a squeeze in 10-year notes on Thursday, as the sellers likely scrambled to acquire the issues. Gilt futures opened steady on Friday after climbing on Thursday, when the spread of 10-year gilts against German bunds narrowed by about 2 basis points.
--With assistance from Anooja Debnath
To contact the reporter on this story: Stephen Spratt in London at sspratt3@bloomberg.net.
To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Neil Chatterjee, Anil Varma
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