U.K. Plans Record Bond Sales to Lift Ailing Economy From Crisis

The U.K. will sell a record amount of government debt this year as the country battles the economic fallout from the coronavirus, testing the level of market demand for its bonds.

The Debt Management Office announced plans to sell another 50 billion pounds of gilts ($61.9 billion), bringing its issuance this fiscal year through August to 275 billion pounds. A survey of primary dealers forecast 412 billion pounds of issuance for the year.

The plans look set to dwarf those during the height of the financial crisis. While the Bank of England is helping to keep bond yields in check through its asset-purchase program, the latest figures will likely add to concern over borrowing levels.

“It‘s a bit higher than I expected,” said Adam Dent, U.K. rates strategist at Banco Santander SA. “The government’s cash needs should be front-loaded.”

No Austerity

The announcement highlights the uncertainty surrounding the economic and fiscal outlook for the rest of this year. After spending huge amounts to protect the U.K. through the lockdown, the government looks on course to commit even more money to aid the recovery, in plans that may be laid out in coming days.

Before a key speech on Tuesday, Prime Minister Boris Johnson has already vowed to spend large sums on hospitals, schools and roads to jump-start the economy, while Chancellor Rishi Sunak is also due to outline his next steps. The U.K.‘s debt load climbed above the nation’s yearly economic output in May for the first time since 1963.

The pound rose 0.3% to $1.2370. U.K. bonds, which rallied to touch record-low yields in shorter maturities this month, slipped to send 10-year yields up two basis points to 0.19%.

No Syndicated Debt

The DMO said that further details of the gilt operations would be announced Friday. It doesnt plan to sell syndicated debt over the period, which has been an increasingly popular way for governments to raise large amounts of cash.

The DMO had previously only given issuance plans for the four months through July, which stood at 225 billion pounds, just three billion pounds short of the previous record in 2009-10.

— With assistance by David Goodman

(A previous version of this story was corrected to say that U.K. bond yields fell to a record this month.)