Under financial pressure, the UK plans to increase the issuance of 9 billion worth of national debt, which may result in the second highest annual issuance scale in history.

Bond traders are preparing for the UK government to raise more funds by issuing larger amounts of government bonds. According to a survey of 14 primary dealers, the median forecast suggests that the UK government will issue an additional 9 billion (approximately $11.8 billion) in government bonds in the current fiscal year, surpassing the plan announced by the Debt Management Office (DMO) in April and bringing the total issuance for the year to 308.1 billion, the highest level since 2021. This would be the second highest annual issuance amount in history, second only to the significant borrowing increases during the pandemic relief efforts. It is reported that the DMO usually updates its bond issuance forecasts in conjunction with the budget announcement. UK Chancellor of the Exchequer Rishi Sunak is set to deliver the Autumn Budget for 2025 on November 26. Due to the fiscal rules she has set out and emphasized in recent weeks, Sunak must urgently find strategies to fill a multi-billion pound public finance gap before presenting the budget. This means she will either have to make significant spending cuts, go back on her promise not to increase specific taxes as stated in her election manifesto, or a combination of both. If investors are dissatisfied with the budget, UK government bonds could be sold off. UK government bonds have become a focal point of fiscal concerns. Following the yields on some maturity government bonds reaching a 27-year high in September, the expectation of fiscal tightening, UK government bonds saw their best performance in nearly two years last month. However, UK government bond yields still remain the highest among major developed countries. As investors approach the eve of the Autumn Budget, they are treading carefully. Sunak's decision to abandon plans to increase income tax in the budget last week caused significant market volatility, with UK government bond yields rising by the largest margin since July last Friday. This budget is an opportunity for the Chancellor to create fiscal space for the government to comply with fiscal rules covered by tax revenue for daily spending and ease concerns in the bond market. An important question is how much buffer can be built? Sources revealed last week that Sunak's target range is 15 to 20 billion. The median forecast of surveyed banks is 15 billion. It is worth noting that even with the expected increase in borrowing, investors will still pay attention to the possibility of the DMO canceling some scheduled bond issuance plans. Earlier this year, UK officials concentrated bond issuances in the first part of the year, completing nearly 75% of the annual target in just eight months. Sam Hill, director of market insights at Lloyd's Bank, stated, "Even with the increased issuance target, there is still the possibility of canceling some scheduled offerings." He pointed out that up to six bond auctions could potentially be canceled. Meanwhile, Jamie Searle, head of European rate strategy at Citigroup, assumes that the Chancellor can create additional buffers while introducing measures to lower inflation. This could, in turn, prompt the Bank of England to cut interest rates faster. Jamie Searle believes, "The day of the budget announcement could ultimately become a positive moment for UK government bonds."