LONDON, July 5 Reuters Britain sold a government bond at auction on Wednesday that will pay investors an annual return of 5.668 the highest yield of any gilt sold since 2007, as markets demand extra returns in anticipation of further Bank of England rate rises.

The United Kingdom Debt Management Office sold 4 billion pounds 5.08 billion of a government bond which will mature in October 2025 , which attracted strong demand at 2.77 times the volume of offer, up from 2.34 times when the gilt was previously sold on June 7.

The last time the average yield at a gilt auction was higher was in June 2007, when 2.5 billion pounds of fiveyear gilts sold at an average yield of 5.790.

Before that, the highest yield was in September 1999 when 2.7 billion pounds of 10year gilts were sold at an average yield of 5.694.

Less than two years ago before the BoE had started to raise interest rates, and when inflation was near its 2 target government bonds sold at auction with yields of less than 1.

The auction highlights how the cost of British government borrowing has shot up this year. When the October 2025 gilt was sold at auction last month the yield was 4.874, and at its launch in January it paid investors a yield of 3.634.

Last month the BoE unexpectedly raised its main interest rate to 5 from 4.5, as Governor Andrew Bailey said inflation looked more persistent than expected, and financial markets currently expect rates to peak at 6.25 in December.

Consumer price inflation held…