7OCT

Index-linked 2049 gilt cleared at 3.58 times cover

1 min read

12:52UTC

The Debt Management Office sold £900m of the 1⅞% Index-linked Treasury Gilt 2049 on 3 September at a real yield of 2.496%, with £3,220m bid.

← Back to £8.1bn over forecast, and the 30-year at 6%Jump to analysis ↓

EconomicDeveloping

Key takeaway

A 2.496% real yield locks in a return above inflation until 2049.

The UK Debt Management Office sold £900m of the 1⅞% Index-linked Treasury Gilt 2049 on 3 September 2026, took £3,220m of bids for a cover of 3.58 times, and struck a real yield of 2.496%⁠¹.

Striking the line at 2.496% commits the government to that return above whatever inflation does between now and 2049, because an index-linked gilt pays out more as prices rise and a real yield is what a lender earns on top of inflation rather than including it. The taxpayer funds that protection for twenty-three years, until the line matures in 2049.

Roughly a quarter of the outstanding gilt stock moves with prices, so inflation lifts the payments on lines like this one instead of eroding them. A government whose debt is fixed in cash can let inflation shrink the real burden of it. Britain can do that to about three quarters of the stock, and each index-linked sale adds a little to the quarter where the trick does not work.

Deep Analysis

In plain English

Most government debt pays a fixed amount of interest whatever happens to prices. This type, called index-linked, is different: its payments rise automatically if inflation rises, protecting the investor but also meaning the government cannot quietly reduce the real cost of this debt through inflation the way it can with ordinary borrowing. The government sold £900m of this kind of debt on 3 September, and investors bid £3,220m for it, well over three times as much as was on offer.

What could happen next?

Meaning
Roughly a quarter of the UK's gilt stock is index-linked, which structurally limits how much an inflation-led reduction in the real debt burden could achieve.

Sources:UK Debt Management Office

Mentions:Debt Management Office →

First Reported In

Update #3 · Debt ratio fell; borrowing missed by £2.3bn

UK Debt Management Office· 3 Sept 2026

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Causes and effects

This Event

Index-linked 2049 gilt cleared at 3.58 times cover

Every index-linked sale enlarges the part of the debt that inflation cannot erode.

Led to

30-year gilt passes 6%, last seen 1998

An early-September index-linked sale drew 3.58 times cover, above the 3.07 times of 22 September.

Occurred 7 Oct 2026

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Different Perspectives

Conservative Party

Leader Kemi Badenoch said Labour will run out of money and proposed lifting defence to 3% of GDP, paid for from welfare. Shadow work and pensions secretary Helen Whately put those savings at £23bn, "just the start".

Reform UK

Treasury spokesman Robert Jenrick pledged £80bn a year of spending cuts by the end of the next parliament and claimed £30bn a year of interest savings. The Spectator judged that the sums still do not fully add up.

Centre for Policy Studies

The right-of-centre think tank argued on 4 October that Britain is not a low-tax country once workplace pensions and student-loan repayments are counted. Its comparison rests on 2019 data.

Institute of Economic Affairs

The free-market think tank argued on 28 September that alcohol, tobacco and landfill duties raised £5.2bn less than the OBR projected. That comparison is separate from the five-month borrowing overshoot.

Resolution Foundation

The centre-left think tank said on 8 September that about £1 in every £12 of public spending now goes on debt interest. In July it put headroom against the fiscal rules at about £10bn.

Audit Scotland

It reported on 17 September that three Scottish budgets planned ScotWind drawdowns and drew nothing each time. It warned that using one-off receipts to balance annual budgets can weaken spending control.