UK Long-Term Bond Issuance Plans Draw Market Warnings
Taylor Wilson
The UK's plan to sell £22.4 billion in long-dated gilts this fiscal year faces a collective pushback from three major institutional investors — three months in, not a single bond of 15 years or longer has been sold, and forcing the schedule could drive borrowing costs even higher.
Why has nothing been sold in three months?
The UK Debt Management Office (DMO — the agency that borrows on the government's behalf) planned to issue £22.4 billion (about $30 billion) in long-dated gilts this fiscal year. Over three months in, not one bond of 15 years or longer has gone to market.
The immediate cause is a political vacuum: after PM Starmer's resignation, the new prime minister and chancellor will not unveil a budget until autumn. This means → until then, the market has no clarity on spending or borrowing plans, and no buyer wants to lock in a 15-year-plus bet.
In plain terms = the government wants to borrow for 30 years, but buyers are saying "you haven't even named the next person in charge — why would we lend?"
Why is the 30-year yield so alarming?
The 30-year gilt yield is the most sensitive to fiscal policy. It started the year around 5.2%, surged to 5.86% in May — a 28-year high — and, after easing briefly, jumped back to 5.7% on Wednesday after Trump declared the US-Iran ceasefire deal "terminated."
This means → every new long-dated bond the government issues now costs interest at levels not seen in nearly 30 years. Flooding the market with more supply would force buyers to demand an even higher premium, pushing rates up further.
This reflects a vicious-cycle risk: more supply → higher yields → existing bonds lose value → sentiment worsens → the next sale gets harder still.
What are the institutional investors saying?
Ben Nicholl, senior fund manager at Royal London Asset Management, was blunt: "The DMO has no choice but to adjust its long-dated issuance plan."
April LaRusse, head of investment specialists at Insight Investments (Aviva), warned: "Long-end gilt yields are simply too high. If three syndicated long-dated sales really go ahead, the market may struggle to absorb them."
In plain terms = the people who manage the money are telling the government: we cannot take this volume at current prices — forcing it will only make the selloff worse.
Is there a middle path?
Barclays strategist Moyeen Islam sees a possible compromise: the DMO could stage one smaller long-dated sale later in the fiscal year, maintaining a presence at the long end without "spooking the market."
At the same time, shifting more borrowing to short-dated Treasury bills — shorter-maturity government IOUs. This means → short-term rates are typically lower, which would compress the weighted-average maturity of UK debt and reduce overall borrowing costs.
But Craig Inches, head of rates and cash at Royal London, poured cold water on the idea: "Unless borrowing volumes drop by some miracle, the room to manoeuvre is extremely limited." Whether the autumn budget can provide a credible enough policy anchor to restart long-end issuance is the market's next key test.
Content is for reference only, not financial advice.