The UK Debt Management Office issued a 30-year government bond maturing in 2056 with a yield of 5.8168% and a coupon rate of 5.375%, raising approximately £4 billion to £4.25 billion. This is the highest issuance rate since the agency was established in 1998, surpassing the 5.79% yield from the auction in May 1998. The book order was around £85 billion to £87 billion, indicating strong demand, but the Treasury locked in costs at nearly a 28-year high.

The secondary market saw earlier breakthroughs. The yield on 30-year gilt bonds reached 5.921% on the 2nd of this month, also a high since 1998; the issuance day quote was about 5.80% to 5.82%. The 10-year yield briefly rose to about 5.22% to 5.25%, a high since the financial crisis. Among major developed economies, the UK has the second-highest government financing costs after Australia.

Global long bonds are being sold off simultaneously. Middle Eastern conflicts have pushed up oil prices, raising inflation expectations, with long-term rates in the US and Japan also rising. Bank of England Governor Andrew Bailey noted that oil prices are putting pressure on inflation and interest rates. Chancellor of the Exchequer John Healey is set to submit the budget on October 28; if the Office for Budget Responsibility reassesses based on current rates, the £24 billion to £26 billion fiscal surplus left by the previous administration could be reduced by more than half due to interest payments.

This is a reopening of the benchmark bond first issued in May 2025, when the yield was 5.4047%. The Debt Management Office has reduced the supply of ultra-long bonds in recent years. Lead managers include Bank of America, Goldman Sachs, JPMorgan, Santander, and UBS. Officials state that demand for ultra-long sterling assets remains, but every additional pound issued by the Treasury is accounted for at a higher coupon rate.

Mechanically, this is a repricing of supply and inflation premium, not a lack of buyers. Buyers include institutions like pension funds and insurance companies that must match long-term liabilities, while sellers are the UK government that must roll over financing. Funds are entering around 5.8%, locking in interest outflows for the next thirty years. Beneficiaries are long-bond accounts that buy at market prices; those under pressure are the spending space of the autumn budget and all mortgages and corporate bonds priced against gilt yields. High subscription rates only indicate that prices are already high, not that financing has become cheaper.

Source: Public Information