The financing cost for a UK government bond sale is poised to climb to its highest level since at least 1998, as a global selloff in fixed-income markets drives up yields and further tightens the nation's fiscal headroom.

According to sources familiar with the matter, the UK is marketing a benchmark-sized gilt maturing in January 2056, with price guidance set at approximately 0.75 to 1 basis point above the yield on the existing 2055 gilt. The sources requested anonymity as the details are not yet public.

Based on this pricing level, the yield on this issuance would surpass all previous gilt sales conducted by the UK Debt Management Office since its establishment in 1998.

Over the past weeks, UK gilts have been among the hardest hit in major developed economies during the global bond selloff, with yields hovering near multi-decade highs. The upward pressure on yields is being fueled by concerns over energy-driven inflation shocks, widening government budget deficits, and a wave of corporate bond issuance from companies involved in the artificial intelligence boom.

The syndicated sale, expected to be priced late on Tuesday, represents a tap of a £5.9 billion gilt initially issued in May 2025. At that time, the bond was sold with a yield of 5.405%, which was then a record for a UK gilt syndication.

Analysts at RBC Capital Markets, including strategist Megum Muhic, project that the current offering could raise as much as £5 billion. On Tuesday, the yield on the existing 30-year gilt stood at 5.83%, having reached its highest level since May 1998 earlier last week.