The UK government paid the highest yield on a 10-year gilt sale since 1999, as investors demanded a larger premium to offset persistent inflation pressures and the prospect of possible spending increases in next month's budget.

The Debt Management Office sold £4.25 billion ($5.6 billion) of gilts carrying a 4.875% coupon maturing in July 2036, at an average yield of 5.383%.

The same bond fetched an average yield of 5.16% at last month's sale, which was already the highest in nearly two decades.

Since then, 10-year gilt yields have climbed further, touching a 19-year high of 5.44% on Monday. The bonds were trading around 5.39% after the sale.

"The auction was on the weak side and reinforces the view that investors are reluctant to add duration at these levels despite the attractive yield," said Evelyne Gomez-Liechti, multi-asset strategist at Mizuho International.

Tuesday's offering drew bids equal to 3.34 times the amount sold, down from a subscription ratio of more than 3.6 times at last month's sale of the same bond.