UK to launch 12-month T-bills to broaden debt sales

* UK to hold weekly sales of ​12-month T-bills by ⁠March 2027

* New standing repo facility planned to boost market liquidity

* T-bills ​raise less finance in UK than in other countries

* Financial firms welcome prospect of greater liquidity

* UK 30-year gilt yields now highest since 1998

LONDON, ‌May 5 (Reuters) - Britain's finance ministry and its Debt Management Office on Tuesday announced details of a plan that they hope will pave the way for ⁠more sales of one-year government debt to complement near-record sales of bonds with longer ⁠maturities. The Treasury and the DMO said they would ​introduce tenders of 12-month Treasury bills by the end of the 2026/27 financial year "to capture incremental sources of structural demand for maturities beyond six months".

The DMO aims to raise 251 billion pounds ($340 billion) to finance public spending this financial year, but only 5 billion pounds of this ​is currently ‌planned to come from T-bills. The remainder will come from gilts with an average maturity of more than 13 years.

Currently T-bills are issued at weekly auctions with one-month, three-month and six-month maturities. The DMO mostly uses Treasury bills to manage government cash needs within the financial year - with 90 billion pounds of this debt in issue at the end of 2025 out of a total debt stock of 3.0 ​trillion pounds.

STANDING REPO FACILITY TO BOOST MARKET LIQUIDITY The Treasury and the DMO, which launched a consultation on expanding the T-bill market in ‌January, also said a standing repo facility for T-bills would be established in 2026/27.

Kevin Cook, chief executive of TreasurySpring, which helps large companies use Treasury bills to manage cash reserves, said the ‌repo facility would boost liquidity and that clearer issuance plans would help draw in new investors.

Overall, the plans were a positive step, but there was also scope for T-bills with much shorter maturities, he said.

"We see demand from corporate treasurers and other professional cash investors ​for one-week and two-week T-bills, where maturities align more closely with real-world liquidity needs," he said. The sale of T-bills in Britain accounts for a much smaller proportion of ‌overall net government debt sales than in other countries such as the United States.

British government bond yields have surged since 2022, particularly for longer maturities, with 30-year yields hitting their highest since 1998 on Tuesday and 10-year yields on track for their highest close since 2008.

The ⁠DMO has shortened ⁠the average maturity of newly issued gilts over the past three years but has been ‌wary about substantially expanding net T-bill issuance, partly due to how often the bills mature and need to be sold again at auction.

"The size of the UK ​T-bill stock will continue to be ​driven by a range of factors ... with refinancing and refixing risks being particularly pertinent," Tuesday's report ‌said.

Tuesday's joint statement said a T-bill collateral pool would be created with collateral creation expected to begin after British finance minister Rachel Reeves' budget towards the end of 2026.

Further details of the new measures would be provided at the budget, the statement said.