By Jessica Fleetham

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The U.K. Debt Management Office forecast a sharp increase in borrowing, to be financed mostly by issuance of government bonds, after the new government announced substantial fiscal stimulus.

This will see the net financing requirement jump by 72.4 billion British pounds ($80.41 billion) to GBP234.1 billion ($260.02 billion) in the 2022-23 fiscal year, the DMO said.

The DMO's financing remit has been published as U.K. Treasury Chief Kwasi Kwarteng confirmed a costly cap on increases in energy prices and announced sweeping tax cuts in his mini-budget statement Friday.

The extra borrowing will be financed by additional gilt sales during the 2022-23 fiscal year of GBP62.4 billion, taking the total to GBP193.9 billion, as well as GBP10.0 billion in net sales of Treasury bills, the DMO said.

There will be thirteen additional gilt auctions and one extra syndicated sale during the remainder of the financial year, with a particularly sharp jump in sales of short-dated debt. Auctions of inflation-linked--or index-linked--gilts will stay the same and syndicated sales will be reduced, it said.

Auctions of short-dated gilts will increase by seven, taking the new total to 20. There will be five additional auctions of medium-dated gilts, taking the total to 17; and one additional auction of long-dated gilts, with a total of 16.

The DMO plans an additional syndicated sale of a new January 2038 gilt in the week starting October 31.

Planned syndicated sales of index-linked gilts will fall by GBP1.0 billion to GBP7.5 billion over the 2022-23 financial year, it said.

Gilt yields rose sharply in response to the DMO's announcement, with the 10-year gilt increasing by more than 20 basis points on the day to 3.707%, compared with around 3.555% just beforehand, according to Tradeweb.

Write to Jessica Fleetham at jessica.fleetham@wsj.com

(END) Dow Jones Newswires

September 23, 2022 06:45 ET (10:45 GMT)