LONDON Britain's government will plan to sell its smallest amount of bonds in a decade for the coming fiscal year, a Reuters poll of primary dealers found on Tuesday, as finance minister Philip Hammond looks set to beat his borrowing targets for this year with ease.
He is due to deliver Britain's annual budget statement - his first since taking over after last June's Brexit vote - on Wednesday.
The mid-range forecast from the poll suggested the United Kingdom Debt Management Office will issue 109.7 billion pounds ($134.2 billion) of bonds in the financial year starting in April, down sharply from the 146.5 billion pound remit for 2016/17.
Britain had originally planned to issue 129.4 billion pounds' worth of gilts in 2016/17, but the DMO was forced to revise up its plans in November after the government's budget watchdog downgraded the economic outlook in the wake of June's referendum.
The sharp fall expected for 2017/18 reflects a surge in tax revenues that will likely leave Britain's government over-funded for the period by more than 10 billion pounds relative to November's forecasts.
That, coupled with continued progress towards cutting the budget deficit, means Britain will be able to issue the smallest amount of government bonds since 2007/08 - just before the financial crisis caused government borrowing to balloon.
Hammond said on Sunday he would keep "reserves in the tank" to see the economy through its looming Brexit challenge, signalling little room for extra spending in this week's budget despite the better news on borrowing.
He is likely to announce on Wednesday a big upgrade to official economic growth forecasts for 2017.
Fourteen out of the 16 wholesale primary dealers - known as Gilt-Edged Market Makers (GEMMs) - took part in Tuesday's poll.
The poll suggested the DMO will adopt a similar issuance profile to the current financial year, with sales being split more or less evenly across the range of conventional gilt maturities and linkers, but slanted slightly in favour of long-dated bonds.
(This version of the story corrects figures provided by Morgan Stanley, no change to the median forecast in poll)
(Reporting by Andy Bruce; editing by John Stonestreet)