The UK government has paid the highest interest rate since 1999 on a sale of 10-year bonds, according to Reuters. The £4.25bn auction of a new gilt maturing in 2036 concluded with bond investors demanding an average yield of 5.383%.
Auction demand remains strong
The auction, held by the Debt Management Office, received bids for more than three times as much debt as was on offer, indicating investors remain keen to buy UK debt, but at a higher price.
Impact on government finances
The result follows months of turmoil in government bond markets driven by inflation fears, which have pushed up yields on traded debt. Today's auction highlights that those moves have real implications for the government, as higher bond yields increase the cost of servicing the national debt.
Earlier this month, the UK government was forced to pay the highest interest rate for a 30-year bond since 1998. These rising costs have implications for the government's spending plans, ahead of Andy Burnham's speech to Labour's party conference at 2pm today.
