U.K. March 2045 Index-Linked Gilt Seen as Undervalued Ahead of Auction

U.K. March 2045 Index-Linked Gilt Seen as Undervalued Ahead of Auction

The U.K.’s March 2045 index-linked gilt is considered undervalued on a micro relative-value basis, making it an appealing buy ahead of an upcoming auction, according to analysts at RBC Capital Markets. The auction is scheduled for 0900 GMT, and investor interest is expected to be strong.

In a note to clients, RBC analysts highlighted that the bond appears cheap when compared to similar instruments in the market, offering a relative-value opportunity for investors. "The bond screens as cheap on micro relative value, which should help support demand at the auction," the note said.

Adding to the appeal, this is the final auction of U.K. inflation-linked gilts ahead of a planned syndicated sale in June, making it potentially more attractive for buyers looking to secure exposure before market conditions shift.

Index-linked gilts, which adjust payouts in line with inflation, have seen increased interest in recent months as investors position themselves against persistent price pressures in the U.K. economy. The March 2045 gilt, in particular, offers long-duration inflation protection, making it valuable for pension funds and other long-term institutional investors.

Given its valuation and the auction timing, RBC expects solid demand and sees this as a favorable entry point for those looking to lock in inflation-adjusted returns.