Finance
UK nudges up gilt issuance to second-highest on record
Published by Global Banking and Finance Review
Posted on November 26, 2025
3 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on November 26, 2025
3 min readLast updated: January 20, 2026
The UK's Debt Management Office has increased gilt issuance to the second-highest level on record, focusing on short and medium-dated gilts to manage costs.
By David Milliken
LONDON (Reuters) -Britain's Debt Management Office nudged up its gilt issuance plans for this financial year to the second-highest on record, but the smaller-than-expected increase and the cancellation of some long-dated gilt auctions helped lower yields.
The DMO revised up 2025/26 gilt issuance by 4.6 billion pounds ($6.1 billion) to 303.7 billion pounds after finance minister Rachel Reeves' annual budget, a slightly smaller increase than the median 8.6 billion rise predicted in a Reuters poll of gilt dealers on Tuesday.
The debt issuer also continued to shift sales towards short and medium-dated gilts - those with maturities of 1-7 and 7-15 years - and away from costlier long-dated gilts, whose yields hit their highest since 1998 in September.
Three auctions of long-dated gilts due before the end of March were cancelled, as well as two index-linked gilt auctions and an auction of a short-dated gilt.
"Bearing in mind the elevated overall remit, we need to be pragmatic and to a certain extent this relies on both greater access to the shorter-dated sector but also the medium-dated sector," DMO chief executive Jessica Pulay told Reuters.
HALF AS MANY LONG-DATED GILTS ISSUED AS LAST YEAR
Long-dated gilts are on course to account for around 9.5% of issuance this year, half their share in 2024/25.
Pulay said it was too soon to say if next year's remit, likely to be announced in March, would have a similar shape.
Before then, the DMO and Britain's finance ministry will consult investors on expanding the country's Treasury bill market, which accounts for only a small share of financing.
"Every remit needs to be assessed based on cost and risk characteristics for the government and for the prevailing market conditions at the time. So I wouldn't want to signal a direction of travel at this point," Pulay said.
Based on updated government borrowing forecasts from the Office for Budget Responsibility, the DMO expects gross financing requirement, which also includes net Treasury bill issuance, to drop to 275 billion pounds, a slightly smaller fall than the decline to 271 billion seen in March.
The year after, in 2027-28, financing needs are expected to be significantly higher at 308 billion, up from 265 billion.
In total, gross debt issuance over the next four years is expected to be 78 billion pounds higher, an 8% increase on March's projections.
"It's notable that the government has changed the profile of its issuance, shifting to cost-effective shorter tenors. The downside of this is the need to refinance more often," said Rob Gall, head of market strategy at Insight Investment.
Nonetheless, gilt prices rallied sharply on Wednesday and 30-year yields dropped by the most in a single day since April, when U.S. President Donald Trump's tariff plans unsettled markets.
The latest OBR forecasts show Reeves targeting 21.7 billion pounds of headroom for her 2029/30 budget goals, more than twice as much as in her last fiscal update in March and a bigger increase than the rise to 16.9 billion pounds which bond dealers had expected.
($1 = 0.7582 pounds)
(Reporting by David Milliken; editing by Sarah Young, Andy Bruce and Toby Chopra)
The main topic is the UK's increase in gilt issuance to the second-highest level on record and its impact on yields and market strategies.
Long-dated gilt auctions are reduced to shift focus towards cost-effective short and medium-dated gilts, which helps manage government borrowing costs.
The DMO expects gross financing requirements to drop slightly next year, with higher needs projected for 2027-28.
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