UK bond sales could hit nearly £310 billion

UK bond sales are expected to reach nearly £310 billion next year. This amount is nearly a record high and will test market confidence in Chancellor Rachel Reeves’ spending plans. The UK’s Debt Management Office will reveal its plans for bond issuance on March 26, along with the Chancellor’s Spring Statement on public finances. Investment banks anticipate that the Treasury will increase its net financing requirement for the year ending March 2026 to £308 billion. This would exceed the previously set £300 billion figure for 2024-25. Craig Inches, from Royal London Asset Management, believes the market could handle this amount if it comes with significant spending cuts. However, he warned that any signs of reckless spending could harm the already struggling gilt market. There has been an increase in global bond yields since the October Budget. UK 10-year borrowing costs hit a 16-year high of 4.93 percent in January but have since decreased to 4.63 percent. Economists say the rise in interest costs has limited Chancellor Reeves’ financial flexibility. Some investment firms are predicting £10 billion in spending cuts to improve public finances. If the bond issuance exceeds expectations or if public finances look worse, it could disturb the market. Investors are keen to see how the Debt Management Office plans to distribute the debt between short-term and longer-term bonds. Strategists suggest that the government should accelerate the shift towards more short-term debt. This change could help stabilize long-term yields and lower interest costs. A Treasury spokesperson emphasized that meeting fiscal rules is essential for the Chancellor.