UK cuts costly long-dated gilt issuance again, raises T-bill sales

UK cuts 2025/26 long-dated gilt issuance by 10.4 billion pounds

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30-year borrowing costs hit highest since 1998 after Trump turmoil

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T-bill issuance up 5 billion pounds, short gilts up by 7 billion

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Changes follow 14.6 billion pound upward revision to 2024/25 deficit

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UK long-dated issuance on track for lowest share in 35 years

LONDON, April 23 (Reuters) - Britain's Debt Management Office said on Wednesday it was further cutting back its issuance of long-dated government bonds this financial year but would boost sales of short-dated bonds and Treasury bills to finance higher government borrowing.

Britain - which has the longest average bond maturity of any major economy - sharply cut back the share of long-dated gilts in new issuance last month, partly in response to the cost of this type of borrowing having hit its highest since 1998.

Wednesday's DMO issuance revision came in response to official data earlier in the day which showed the government deficit was 151.9 billion pounds ($202.1 billion) in the 2024/25 financial year, 14.6 billion pounds more than the official estimate when the DMO set out its 2025/26 borrowing plans in March.

The DMO said it would increase net Treasury bill sales for the current 2025/26 financial year by 5.0 billion pounds to 10.0 billion pounds while lowering gilt sales by 0.1 billion to 299.1 billion pounds.

However, within the gilt sales programme there was a marked further move towards shorter-dated gilt issuance, after what DMO chief executive Jessica Pulay told Reuters had been an "important shift" away from long-dated sales in March.

Long-dated gilt issuance - which covers gilts with a maturity of more than 15 years - has now been reduced by a further 10.4 billion pounds to 29.8 billion pounds. Issuance of short-dated 3-7 year gilts will increase by 7.0 billion pounds to 117.9 billion.

Medium-dated and index-linked issuance was unchanged while unallocated issuance - where the maturity will be decided later - has been increased by 3.3 billion pounds.

Long-dated gilt sales are now set to fall to 10.0% of total issuance, half their percentage in 2024-25 and the lowest in 35 years.

Deutsche Bank said in a note to clients the cut appeared to reflect renewed concerns about the cost of long-dated borrowing.

"Another steep change in the issuance allocation suggests that the DMO remains dynamic and agile in reacting to recent market events - better matching UK gilt supply with gilt demand," analysts Sanjay Raja and Shreyas Gopal wrote.

Thirty-year gilt yields hit their highest since May 1998 at 5.649% on April 9 after U.S. President Donald Trump hit China with 104% tariffs, sending markets reeling.

A day later the Bank of England postponed one of its own sales of long-dated gilts in response to market conditions that BoE Chief Economist Huw Pill called "a little bit febrile".

Debt issuance authorities appeared to have been keen to avoid a rise in overall gilt issuance on Wednesday that might have added to market volatility, Raja and Gopal added.

Some bond investors have expressed concerns about Britain's combination of high borrowing, high debt servicing costs, relatively weak economic growth and persistent inflation.

On Wednesday, 30-year gilt yields were down by a hefty 12 basis points on the day at 5.24% at 1125 GMT, a decline in line with the move in 30-year U.S. Treasuries. Five-year gilt yields were little changed at 3.98%. ($1 = 0.7517 pounds) (Additional reporting by Andy Bruce; editing by Sarah Young, Suban Abdulla and Hugh Lawson)