The UK government on Wednesday sold a bond that pays a negative yield for the first time.

The UK sold £3.8 billion of three-year gilts at a yield of minus 0.003%, the UK’s Debt Management Office said.

The sale means the UK government is effectively being paid to borrow.

The bond, which matures in July 2023, sold at an average yield of -0.003%.

Investors will receive an annual interest payment of 0.75% — but they paid above face value for the bond so the actual return is less than they lent.

Aaron Rock, investment director at Aberdeen Standard Investments, said: “The decline into negative gilt yields has been aided by the current Bank of England Quantitative Easing buyback program, and the ongoing debate within the MPC over the potential for negative policy rates in the UK. 

“Whether the Monetary Policy Committee choose to adopt negative policy rates or not due to low inflation, there will be continued demand for gilts at low and negative yields. 

“The MPC will likely increase the size of their QE program in June, and reserve managers and other investors continue to view the UK as retaining institutional credibility and low credit risk. 

“For the Debt Management Office, issuing debt with a negative yield for the first time holds some element of novelty value and mirrors what we’ve seen in Europe and elsewhere. 

“But DMO’s primary concern will be on ensuring they can continue with their heavy issuance program against a backdrop of stability within the gilt market, something which they now appear reliant upon the BoE and their QE program to provide.”