The UK will sell a record amount of government debt this year, testing the level of demand for gilts as Britain grapples with the economic fallout from the coronavirus pandemic.
The UK’s Debt Management Office (DMO) this morning announced plans to sell a further £50bn of bonds by the end of August, bringing its issuance for the fiscal year up to £275bn.
The government is ramping up bond issuance to pay for a surge in borrowing to fund its response to the coronavirus pandemic, with the plans set to dwarf the measures taken at the height of the 2008 financial crisis.
The plan to raise at least £275bn in the first five months of the 2020/21 financial year is more than double the £136.8bn remit for the entire 2019/20 financial year.
Having spent huge amounts to help shore up the economy during the coronavirus lockdown via measures including the job retention scheme and bounce back loans for businesses, the government looks set to commit even more money to help Britain’s economic recovery.
Over the weekend, Prime Minister Boris Johnson pledged to spend billions on a host of infrastructure and jobs programmes to help the economy recover from the Covid-19 crisis.
Johnson said he would “double down” on his election commitment to “level up” the country, fast-tracking a raft of infrastructure projects.
The DMO’s announcement of further bond issuance highlights the economic uncertainty surrounding the UK’s fiscal and economic outlook for the remainder of 2020 and beyond.
Johnson and chancellor Rishi Sunak are both set to outline key plans for next steps in the recovery process in the coming days.
The DMO is planning 33 gilt auctions in July and August, and said it would issue an update on its plans for September to November before the end of July.
A spokesperson for the DMO said the one month extension to the gilt remit reflects “the fact that the government’s financing requirement for the full year remains subject to significant uncertainty” over the economic impact of Covid-19.
The DMO and the Treasury “felt it was important to give the market as much clarity as possible about debt issuance plans in the immediate future and we hope that by setting out the gilt auction calendar until the end of August, we are being as transparent as possible about these plans,” the spokesperson added.