UK receives £30bn in orders for green bond

INVESTORS flocked to buy a ‘green’ government bond despite turmoil on the financial markets.

In a sign that appetite for UK sovereign debt remains strong, Britain received £30.1bn in orders for the 30-year bond to fund environmentally friendly projects.

The high level of demand for the £4.5bn bond will have come as a welcome relief on Downing Street and at the Treasury following the turmoil since last week’s tax cutting mini-budget.

But the Government will have to pay the highest interest rate on any debt it has issued since 2011 following the recent slump in bond prices and surge in yields.

Bond yields around the world have risen sharply over the past year as central banks raise interest rates to tackle soaring inflation. They have rocketed higher still in the past week amid fears over how Britain will pay for capping energy prices, as well as £45bn of tax cuts.

Benchmark 30-year UK gilt yield passed 5pc for the first time since 2002 early yesterday, having been less than 1pc less than a year ago but fell sharply to below 4pc after the Bank of England intervened in the bond market by pledging to buy long-dated gilts ‘on whatever scale is necessary’ to restore ‘orderly market conditions’.

The green bond sold yesterday will pay an interest rate of 4.29pc, the highest for any British debt sold since April 2011.

Before the Bank of England intervention, investors were on course for a yield of around 5.1pc, the highest since 2008.

‘Today’s transaction took place against a highly volatile market backdrop, so it is all the more pleasing that it has been well received by the market,’ UK Debt Management Office chief executive Robert Stheeman said after the sale.