The UK is poised to make greater use of short-term debt, according to government bond dealers, a shift that could bring down gilt yields and ease pressure on the country’s strained public finances.

The government is expected to update investors on plans to expand the Treasury bill market on Oct. 28, alongside the first budget from Prime Minister Andy Burnham and his chancellor, John Healey. That comes after the government announced in May that it will introduce a 12-month bill before the end of the fiscal year to complement existing one, three and six-month tenors.

The UK has traditionally relied on longer-dated bonds for borrowing, and building out the Treasury bill market would allow it to tap growing demand for debt that matures quickly while potentially lowering its interest payments. Any savings would be welcome for a government whose already-thin fiscal buffer has been eaten away ahead of the budget by higher borrowing costs.

“Scaling back the weighted average maturity of issuance has the potential to reduce, or reduce the upward pressure on, gilt yields,” said Mark Capleton, a rates strategist at Bank of America Corp. “You reduce the average interest cost by issuing shorter on the curve. And you reduce the rate you pay on, say, the 10-year gilts you issue by issuing fewer of them.”Net issuance of Treasury bills will total £11 billion ($14.7 billion) in the current fiscal year, according to the median of 10 estimates from primary dealers surveyed by Bloomberg.

That’s roughly in line with the previous year, but far above the £5 billion forecast by the UK Debt Management Office in April. Dealers see a sharp increase next year, with Royal Bank of Canada Capital Markets pegging issuance at £25 billion.

The UK is an outlier when it comes to the length of its debt. Only about 20% of its borrowing was in the form of bills in 2025, compared to an average of roughly 47% across members of the Organization for Economic Cooperation and Development.

Yet borrowing for shorter periods comes with a risk: the debt needs to be refinanced more often, leaving governments more exposed if interest rates rise. The UK’s borrowing costs have surged this year amid a global bond selloff, taking benchmark 10-year yields to 5.36%, the highest since 2007.

In the UK, there are signs that investors are hungry for more bills. Demand at weekly auctions has been robust, and banks have increased their bill holdings over the past few years, according to Bank of America. Assets under management at UK money market funds, which typically invest in short-term debt issued by governments, banks and companies, have grown rapidly.

“Clients are essentially looking for returns that can beat cash, have a high level of predictability in outcomes with holdings that can be matched to future liabilities and cashflow needs,” said Jason Hollands of wealth manager Evelyn Partners.

The shift toward shorter debt is already showing some results. UK 30-year yields are down 11 basis points since September 17, when the Bank of England said it would halt sales of longer maturity gilts, compared to a 39-basis-point rise in France and a five-basis-point fall in the US.

That’s helped draw firms including Allianz Global Investors, Rathbones Asset Management and Royal London Asset Management into longer-dated debt.

“Maturity reduction is a global theme for us, but nowhere needs it more than the UK,” said Capleton.