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Government bond issuance surprises and the term structure of interest rates in the UK

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  • Lengyel, Andras

Abstract

How does the additional debt issued by the government affect the term structure of interest rates? In this paper, we examine the impact of unexpected government bond issuance by leveraging the institutional framework of the UK government bond primary market. Our findings indicate that higher-than-expected issuance exerts upward pressure on interest rates by increasing both real term premia and inflation risk premia. These effects are amplified during periods of market stress, with some evidence suggesting that yield reactions become more localised under such conditions.

Suggested Citation

  • Lengyel, Andras, 2026. "Government bond issuance surprises and the term structure of interest rates in the UK," Journal of Banking & Finance, Elsevier, vol. 189(C).
    • Handle: RePEc:eee:jbfina:v:189:y:2026:i:c:s0378426626000890
    DOI: 10.1016/j.jbankfin.2026.107715
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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