UK borrows at highest rate this century in record 10-year gilt auction
The UK sold £4.2 billion of 10-year gilts at an average yield of 5.383% on Tuesday — the highest auction yield since 1999 — as investors demand higher premiums for persistent inflation and heavy borrowing.
The UK government borrowed at the highest rate this century on Tuesday, selling £4.2 billion of new 10-year gilts at an average yield of 5.383% — the highest auction yield since 1999, according to Reuters.
Investors bid for 3.3 times the volume on offer, pointing to strong demand for the paper despite the record yield, Reuters noted.
The auction came after the benchmark 10-year gilt yield hit a 19-year peak of 5.38% on Monday and stood at 5.41% on Tuesday, according to The Edge. Last month’s sale of the same security — 4.875% coupon bonds maturing in July 2036 — notched an average yield of 5.16%, already the highest in nearly two decades.
The surge in gilt yields is part of a global increase in borrowing costs, as elevated energy prices fan fears that inflation will remain higher for longer, forcing central banks to tighten policy further. There are also concerns over the huge scale of public borrowing and the growing debt-servicing burden.
“Borrowing figures remain incredibly challenged, while events in the Middle East show no sign of calming and thus energy costs will remain raised,” Richard Carter, head of fixed interest research at Quilter Cheviot, told The Edge. “That desire for fiscal discipline could be left wanting unless growth prospects suddenly change.”
Traders expect the Bank of England to raise interest rates in November, pricing as many as five rate hikes by the end of 2027.
The high auction yield piles pressure on the government’s finances ahead of the budget on October 28 — a high-stakes moment for Chancellor of the Exchequer John Healey, who used his debut budget address on Monday to pledge fiscal restraint and reassure investors that Andy Burnham’s government will keep tight control of the purse strings.
Sources
- MarketWatch (citing Reuters), “U.K. borrows at highest rate this century”, 29 September 2026 — https://www.marketwatch.com/livecoverage/stock-market-today-dow-s-p-500-nasdaq-steady-start-oil-prices-treasury-yields-high/card/u-k-borrows-at-highest-rate-this-century-fd7YLMn2Evf9Rrszryr8
- The Edge Singapore, “UK set to pay highest yield since 1999 at 10-year bond auction”, 29 September 2026 — https://www.theedgesingapore.com/news/bonds-and-treasuries/uk-set-pay-highest-yield-1999-10-year-bond-auction
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