Two of the UK's largest investment platforms will for the first time allow private investors to buy government bonds as they are issued.
Winterflood Securities, one of the Debt Management Office's appointed dealers for gilts, is teaming up with Hargreaves Lansdown and interactive investor (ii) for the initial auction, which is scheduled for next Wednesday, 28 February.
Until now, retail investors could only purchase gilts in the secondary market, incurring additional dealing charges and facing price spreads.
The initiative comes as a response to a surge in client demand for gilts, reflected in a 315% increase in year-over-year gilt trading volumes on the Hargreaves Lansdown platform, with more than 25,000 of its clients now holding one of the 57 gilts available on its platform.
It also comes with UK public sector net debt standing at £2.54 trillion, or 96% of GDP, at the end of last year, and the government's gross financing requirement around £277 billion for 2024-25, according to the Financial Times.
Tim Jacobs, head of primary markets at Hargreaves, said: "This is a ‘first’ for retail investors and gives them fair access to gilts in the primary market under favourable terms."
Andrew Stancliffe, head of execution services at Winterflood Securities, said the market maker believes "this is the best way to provide an institutional level of access to a retail investor".
John Dobson, head of investment solutions at ii, said: “Other than breaking down the barriers of access, it provides a solid foundation for retail investors to access fixed-income securities. By providing early access, investors get in at the average price and do not have to worry about secondary market movements and the spread on buying and selling. interactive investor also provides this commission-free."
The new process allows clients to buy gilts directly from the DMO Auction, free of dealing charges for the inaugural seven-year gilt offering, which not only eliminates the middleman but also ensures clients can buy at the average accepted price (AAP).
Clients will be given six days to apply for the end-of-February auction, with the first transaction to be exempt from any charge, Hargreaves said.
As part of a wider government initiative to include retail investors, the DMO will publish the prospectus seven days prior to the auction, allowing clients ample time to review and submit their orders.
This aligns with the client journey for other initial public offerings (IPOs) or bond new issues.