The UK government is about to raise an extra £9 billion this fiscal year through bond sales, lifting total planned gilt issuance to £308.1 billion, based on the median estimate of 14 primary dealers surveyed by Bloomberg.

That’s the biggest annual figure since 2021, when pandemic spending forced record borrowing. The number smashes through the earlier April forecast by the Debt Management Office (DMO) and adds fresh weight on Chancellor Rachel Reeves, who has less than a week to finalize a budget aimed at containing the country’s massive debt load.

The revised borrowing estimate lands just days before the November 26 budget, which will also include a new forecast from the DMO. Banks surveyed expect issuance to range between £299.1 billion and £315 billion.

The budget is seen as make-or-break for Reeves, who now needs to show investors that the UK can still meet its fiscal rules, mainly that everyday spending gets covered by taxes, without triggering panic in the bond market.

If her plan falls short, traders could dump gilts fast.

Reeves faces backlash over tax climbdown and bond chaos

Markets are already tense. Just last week, Reeves dropped a proposal to raise income taxes, a move that set off a surge in gilt yields, jumping the most since July.

That reversal blew up investor expectations of a tighter budget and triggered another round of questions about how the chancellor plans to close the fiscal gap.

According to Bloomberg, insiders allegedly say Reeves is now aiming to create £15 billion to £20 billion in extra room to deal with the deficit, with banks expecting the final number closer to £15 billion.

Yields on UK gilts are already the highest among major developed countries, despite falling from the 27-year highs hit back in September.

Traders say that the fall was driven by hopes of fiscal tightening and the best performance in almost two years for the bond market.

But those hopes were shaken again after Reeves backed off tax increases. Bond traders are now watching every move ahead of the budget for signs of more U-turns or surprises.

The Debt Management Office will also be under pressure to manage the extra debt carefully.

With 75% of its full-year bond target already met by front-loading auctions earlier in 2025, there may be some breathing room to shift things around. That’s fueling speculation that the DMO could cancel several upcoming bond auctions to avoid flooding the market.

“It will still be possible to hit the increased target and cancel some currently scheduled supply operations,” said Sam Hill, head of market insights at Lloyds Bank. He added that up to six auctions might be canceled if needed.

Investors expect bond tweaks as Bank of England eyes rate cuts

Some market watchers think this budget could actually end up helping gilts. Jamie Searle, who leads European rate strategy at Citigroup, said he expects Reeves to find a way to build extra headroom while launching steps to cut inflation.

That could give the Bank of England more room to lower interest rates faster.

“The day of the budget may well end up being a positive one for gilts,” Searle said.

Still, that outcome depends entirely on whether the plan holds up under market pressure. The bond market has turned into a stress test for the UK’s fiscal strategy.

Reeves is being forced to deliver a plan that looks tough enough to satisfy traders without triggering political backlash. There’s little room to get it wrong.

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