U.K Pays Multi-Decade High Yields at Long-Term Debt Sale - Update

By Miriam Mukuru

The U.K. sold 4.25 billion pounds ($5.75 billion) in a long-dated debt sale at the highest yield since 1998, a sign of how rising borrowing costs are posing challenges for governments facing historically high levels of debt.

Long-dated government bonds continue to face pressure due to growing concerns about elevated government borrowing and rising debt supply from AI-linked companies.

The U.K. government's outstanding debts total close to 94% of annual economic output, and economists expect the budget deficit to be around 4% of gross domestic product in the current fiscal year. Yields on global long-dated government bonds hit multiyear highs last week as investors demanded extra compensation for buying the assets.

Tuesday's tranche was priced at 93.806 pounds with a yield of 5.8168%, one of the lead manager banks said, significantly higher than the 5.4047% yield paid at the May 2025 syndication. Books for the syndicated sale closed in excess of 85 billion pounds.

Still, demand for 30-year U.K. government bonds remained strong Tuesday, an indication that appetite for long-dated gilts is holding up despite the threat of higher inflation and broader debt concerns.

The well-covered deal shows that investors are still willing to absorb long-dated U.K. debt at these yields, eToro global market strategist Lale Akoner said.

U.K. Prime Minister Andy Burnham and treasury chief John Healey have pledged to maintain fiscal rules at the upcoming budget, calming investor concerns about government spending and borrowing plans.

"Healey's repeated commitment to the fiscal rules means the more immediate risk is a tighter Budget rather than fiscal slippage," Evelyne Gomez-Liechti, Mizuho multi-asset strategist, said in a note.

These reassurances have enabled gilts to outperform their eurozone peers in recent trading sessions, RBC Capital Markets strategists said in a note.

The Debt Management Office reduced the supply of long-dated gilts due to declining demand for the assets and in response to requests from gilt market participants. Tuesday's sale was the first 30-year bond syndication since May 2025.

U.K. 30-year gilt yields last traded at 5.813%, trimming their earlier rise. They hit their highest since 1998 on Sept. 2, at 5.921%.

"Persistent inflation concerns, heavy government borrowing, and growing global bond supply is likely to keep upward pressure on yields," eToro's Akoner said.

Write to Miriam Mukuru at miriam.mukuru@wsj.com

(END) Dow Jones Newswires

September 08, 2026 09:51 ET (13:51 GMT)