UK 30-Year Bond Sale at Highest Yield Since 1998

Britain has sold £4.25 billion ($5.75 billion) of 30-year government bonds at the highest yield since comparable records began in 1998, underscoring the fiscal strain facing the new finance minister ahead of his first budget. The syndicated sale of the 5.375% 2056 gilt was priced at a yield of 5.8168%, surpassing the previous record of 5.79% set in May 1998 and reflecting a sharp rise in global borrowing costs.

The elevated yield places Britain's government borrowing costs second only to Australia among major advanced economies. The recent surge in long-term rates has been driven by global inflation concerns linked to the US-Iran conflict, which pushed 30-year gilt yields to their highest level in over two decades last week.

Despite the high cost, investor appetite remained robust. The sale attracted £87.2 billion in orders, with 71% coming from domestic British investors. The Debt Management Office (DMO) described participation as strong and broad-based, featuring high-quality investors. The bond was priced at the tight end of initial guidance, just 0.75 basis points above the existing 2055 gilt.

Long-dated conventional debt, once a cornerstone of British issuance, is now set to account for less than 10% of the £246 billion of gilt issuance planned for this financial year, as pension fund demand wanes and costs climb.

The sale comes as Chancellor John Healey prepares his October 28 budget. He has stressed fiscal discipline and spending control, while seeking a positive tone on growth. His predecessor had only £24 billion of headroom to meet medium-term fiscal goals, a forecast finalised before the US and Israel launched attacks on Iran—a development most economists expect to worsen public finances. The Office for Budget Responsibility has projected debt interest costs will reach £109 billion this year, or 8.4% of public spending.