UBS expects the UK Debt Management Office to issue £271 billion in gilts for 2026-27, down from the current year due to slower net borrowing and redemptions, according to its latest research note. The bank projects £20 billion in long-dated gilts and £34 billion in inflation-linked securities, noting extending supply beyond 10 years is not cost-effective given current yield curve conditions where 10-year funding costs approximately 4.3%. Long-term real yields offer better value due to high breakevens.

Gilt supply has already slowed significantly, halving in duration from its peak in mid-2025. Through February 24, the DMO raised £285.8 billion, leaving £17.9 billion to fulfill the current remit. Positive budget execution surprises in January, with tax receipts £6 billion above projections and expenditure £3.2 billion lower, make an overfund likely, reducing the 2026-27 Net Funding Requirement by an estimated £4 billion.

UBS expects unallocated supply to remain high at £27 billion, though most issuance will likely be in short and medium-dated gilts.