The UK government is exploring how everyday investors could be encouraged to buy short-term Treasury bills as part of a drive to reduce its reliance on long-term debt issuance.
The Treasury and the Debt Management Office, which conducts Britain’s debt sales, said in a consultation document that they were looking at “measures to incentivise or promote investment” in T-bills by retail customers.
T-bills are government debt securities of less than a year in duration, and they make up roughly £100bn of the almost £3tn in outstanding UK sovereign debt.
Created to help the government to smooth out its cash flow needs as well as for debt management purposes, the securities are typically sold at tenders where they are bought by big banks on behalf of large investors, such as pension funds.
But on Monday the Treasury and the DMO, an executive agency of the finance ministry, asked respondents to the consultation to set out how the government could attract retail investors.
“What risks to the government or the market could arise if the government were to take measures to incentivise or promote retail investment in T-bills and how would these best be mitigated?,” the document added.
The government — which flagged the consultation in the November Budget — said it was exploring options to promote participation in the T-bill market by a broader group of investors, both in the primary sales of debt and by creating a “more active and liquid secondary market”.
That would “in turn support a larger role for T-bills in the government’s debt financing programme”, it added.
The document also asked whether demand could be boosted by offering a broader range of maturities for the debt, whether there could be minimum market share requirements for some firms participating in the market, and whether a standalone so-called repo facility for bills would boost liquidity.
Gordon Shannon, fund manager at TwentyFour Asset Management, said the move reflected a “general shift everywhere to lower duration of issuance by governments” that were facing higher long-term borrowing costs, with the UK needing to “find a market” for the shorter-term debt.
Fund managers have welcomed plans to deepen the T-bills market, which would move the UK in the direction of the US, where such short-term debt accounts for about a fifth of outstanding government debt.
The proposals form part of a broader effort by the government to lean more on short-term debt in order to protect its borrowing costs from a global rise in longer-term market interest rates in recent years.
The UK’s 30-year bond yield is above 5.2 per cent, up from less than 1 per cent in late 2021. Yields move inversely to prices.
The consultation would be open until late February, with decisions announced in the 2026-27 financial year and “with sufficient notice to give the market time to prepare”, the Treasury and DMO said.
