* Planned gilt sales for 09/10 exceed all forecasts
* Stock of gilts could double over next three years
* Bulk of increase to come in medium part of curve
(Adds comment)
By David Milliken and Christina Fincher
LONDON, April 22 (Reuters) - Britain will issue a record 220 billion pounds of government bonds this fiscal year, the Debt Management Office said on Wednesday, as analysts predicted the stock of gilts could double over the next three years.
The issuance total was well above the consensus forecast of market makers polled by Reuters and more than four times the average of the past decade.
"It's a staggering amount, without peace-time precedent," said David Page, an economist at Investec. "The scale of issuance will test investors' appetite."
The gilt market took fright. Futures ended more than a full
point lower while 10-year yields
Concerns over Britain's ability to service its debt pushed sterling to a three-week low against the dollar while credit default swaps on British sovereign debt widened.
Britain sold just under 150 billion pounds of gilts in the financial year just ended -- itself a record. The median forecast of market makers polled by Reuters was for issuance this year of 180 billion pounds. The highest forecast was 200 billion.
"It is massively above anything anyone had expected," said Jason Simpson, gilts strategist at RBS.
BORROWING BONANZA
Although government finances around the world have taken a knock from the recession, Britain has been particularly hard hit.
Tax revenues from traditional cash cows such as banking and property sales have plummeted and government borrowing for the year just ended jumped to almost 90 billion pounds, its highest since records began more than 60 years ago.
Worse is bound to come. Government borrowing this year is forecast to come in at a record 175 billion pounds and some analysts question whether even this forecast may need to be revised up.
So far the British government has had little difficulty finding buyers for its debt. Indeed, yields touched record lows last month as the Bank of England began to snap up gilts for its quantitative easing programme and the recession continued to burnish the appeal of low-risk assets.
But funding the deficit may become harder when the economy picks up, interest rates rise and the Bank of England ends its quantitative easing programme.
Mindful of a failed gilt auction last month -- the first in seven years -- Britain's Debt Management Office confirmed it would issue some gilts via syndicates of banks as well as traditional auctions.
It said it would also step up the pace of mini-tenders.
"It's quite bullish for the long end of the curve because of the restrictive number of auctions for longs, linkers and more syndications and mini-tenders," said Moyeen Islam, gilts strategist at Barclays.
"What looks very bad indeed is the cash deficits going forward. There's still a pretty bleak outlook and means more gilts issuance."
Britain's debt agency said it would issue the following:
- 183 billion pounds in 58 outright auctions
- 25 billion pounds via syndicated offerings
- 12 billion pounds via mini-tenders
It gave the following maturity breakdown:
- 74 billion pounds of short-dated gilts in 15 auctions
- 70 billion pounds of medium-dated gilts in 19 auctions
- 27 billion pounds of long-dated gilts in 12 auctions
- 19 billion pounds long-dated gilts via syndicated offerings and mini-tenders
- 12 billion pounds of index-linked gilts in 12 auctions
- 18 billion pounds of index-linked gilts in syndicated offerings and mini-tenders
For an interview with DMO head Robert Stheeman, click on [nLAK000412]
(Editing by Ron Askew)