United Kingdom government bonds fell, the new government's historically high bond issuance and fiscal stimulus plan may mean that interest rates will remain at higher levels for longer, causing investors to have doubts.

The two-year government bond yield jumped 10 basis points, traders reduced bets on the Bank of England's interest rate cut, and forward contracts are now leaning towards betting on only one more rate cut this year, by 25 basis points. The UK Debt Management Office (DMO) said on Wednesday that the UK plans to issue 297 billion British pounds of UK government bonds in the 2024-25 fiscal year. 16 bond traders surveyed by Bloomberg estimated 293 billion British pounds.

"This doesn't look particularly good," Royal Bank of Canada strategist Megum Muhic said, "Short-term and long-term UK government bond issuance forecasts are both higher than the market's previous expectations."

The prospect of increasing the bond issuance size is putting pressure on UK government bonds. On Wednesday, the 10-year UK gilt yield rose above 4.4%, the highest level in nearly a year. The volatile trend caught investors off guard, causing UK gilts to surge before UK Chancellor of the Exchequer Rachel Reeves announced the budget, but quickly fall back after the DMO's plan was released.