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According to Reuters, the 5.375% 2056 gilt was sold through a syndication at a yield of 5.8168%. That surpassed the previous record of 5.79%, set at a UK Debt Management Office auction in May 1998. The sale comes after a sharp rise in long-term government bond yields globally. Concerns over inflation and the economic impact of the U.S.-Iran war have added to pressure on fixed-income markets, pushing Britain's 30-year gilt yield to its highest level since early 1998 last week. Read more: Global Market: South Korean shares surge as Samsung, SK Hynix rally on AI optimism Rising borrowing costs raise fiscal concerns Britain currently has the second-highest government borrowing costs among major advanced economies, behind Australia. The increase in long-term gilt yields presents a challenge for Finance Minister John Healey as he prepares to set out the government's fiscal plans in the October 28 budget. Long-dated conventional gilts, once a significant component of Britain's government borrowing programme, are becoming less prominent as higher financing costs and weaker demand from pension funds weigh on the market. Read more: Global Market: Japan bond yields ease as yen strength tempers BOJ tightening bets Long-term conventional bonds are expected to account for less than 10% of the £246 billion of gilt issuance planned for the current financial year. Strong demand despite record yield Despite the elevated borrowing cost, investor demand for Tuesday's bond remained robust. Orders reached £87.2 billion, more than 20 times the amount offered. Reuters said the bond was priced at the tighter end of the initial guidance, with the final yield 0.75 basis points above the yield on Britain's 4.25% 2055 gilt. The Debt Management Office said domestic UK investors accounted for 71% of demand, highlighting continued appetite for British government debt even as yields remain elevated. The strong reception also helped ease concerns that a poorly received sale could trigger another increase in gilt yields and further raise the government's financing costs. Budget faces tougher backdrop Healey has sought to project confidence about Britain's growth prospects while also emphasising fiscal discipline and spending controls ahead of the October budget. However, the government's fiscal position has become more challenging as borrowing costs have increased and geopolitical tensions have added to inflation risks. Healey's predecessor, Rachel Reeves, had around £24 billion of headroom against the government's medium-term fiscal targets, including the goal of balancing the current budget by 2029/30. Those calculations were made before the latest escalation involving the United States, Israel and Iran, which economists expect could put additional pressure on Britain's public finances. Debt interest costs remain a major concern The rise in gilt yields is particularly significant because of Britain's already substantial debt-servicing burden. The Office for Budget Responsibility had previously projected that government debt interest costs would reach £109 billion in the current financial year. That figure represents about 8.4% of total public spending, according to the OBR forecast cited by Reuters. With long-term gilt yields now reaching levels not seen in decades, the government's borrowing costs could become an increasingly important constraint on fiscal policy. The strong demand at Tuesday's sale provides some reassurance for the immediate gilt market, but sustained higher yields could increase the pressure on Healey to maintain tight control over spending while seeking to support economic growth. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of The Economic Times.) (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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