Britain issued a 30-year government bond on Tuesday with a volume of £4.25 billion. The yield was 5.8168%, the highest for a comparable issuance since the UK Debt Management agency was established in 1998. The result cements the recent rise in interest costs and increases pressure on the fiscal position of new finance minister John Healey.
The elevated yield reflects stress in global financial markets. Concerns about persistent inflation, fuelled by higher oil prices linked to the war between the United States and Iran, have pushed up long-term borrowing costs worldwide. Britain is particularly affected and now has the second-highest funding costs among major G10 industrial states, after Australia. The development complicates budget planning for Healey, who plans to present his first budget on 28 October and has emphasised fiscal discipline. Even before the latest Middle East escalation, the government had limited fiscal room.
The bond attracted strong investor demand, with bids exceeding £85 billion, or about €99 billion. Matthew Amis, investment director at Aberdeen Investments, said the issuance showed demand for government bonds remained robust at those yields. A weakly received auction would have added further pressure to bond yields and public finances. Bank of America, Goldman Sachs and J.P. Morgan were among the lead underwriters.
