In his early days as a 20-year-old apprentice at a German bank that no longer exists, Robert Stheeman was tasked with the manual job of cutting coupons from bond certificates, a process that involved handling documents up to 500 pages thick.
That initial role marked the beginning of a journey that would see him ascend to a pivotal position in the UK’s financial sector, eventually directing an unprecedented surge in public sector borrowing.
Stheeman’s influence in the realm of UK finance is undeniable. With a career spanning over two decades at the helm of the Debt Management Office, he has facilitated the raising of more than £3 trillion for the nation. This accomplishment has earned him a unique status among London’s bond traders, who regard him as a key yet underrecognized figure in the financial landscape.
As Stheeman prepares for retirement, he highlights the challenges that await his successor. These include maintaining market liquidity and stability in the face of another significant borrowing wave anticipated this year, amounting to around £265 billion, alongside the central bank’s sale of gilts acquired through quantitative easing. This scenario underscores the importance of market resilience amidst a flood of global government issuances competing for investors.
Ensuring this resilience involves a delicate balance between meeting the government’s funding requirements and catering to investors’ preferences for varying debt durations. Moreover, it entails sustaining the commitment of a core group of investment banks, the Gilt-edged Market Makers, even as the market landscape evolves with the entry of hedge funds, algorithmic traders, and other participants.
The Debt Management Office, an entity separated from the Bank of England in 1998, operates discreetly, translating Treasury directives into actionable bond sales strategies, selecting maturities, and ensuring smooth auction processes. Colleagues and industry peers commend Stheeman for his composed demeanor under stress, attributing market confidence and a steady approach to issuance to his leadership.
Stheeman’s tenure also provided him a front-row view of the tumultuous period in 2022, triggered by UK Prime Minister Liz Truss’s unfunded tax cuts. This episode led to significant market volatility, serving as a stark reminder of the market’s power to influence policy. Stheeman warns against underestimating this force, emphasizing the necessity for policymakers to heed market signals.
This cautionary stance is particularly relevant as the US grapples with its substantial debt and the looming expiration of tax cuts initiated during the Trump administration. The debate over fiscal responsibility and market reactions underscores the broader implications of government borrowing strategies.
Looking ahead, the UK government’s bond issuance strategy faces its largest test yet, with a record-setting fundraising target set for 2024. This situation demands astute decision-making to ensure the nation’s financial needs are met without incurring excessive costs—a lesson Stheeman learned firsthand during the financial crisis when he navigated the market’s choppy waters to safeguard taxpayer interests.
Reflecting on his career, Stheeman considers the challenges and milestones, including the singular auction failure under his watch, with a sense of necessity and resilience, underscoring his significant contribution to the UK’s financial stability.
