The UK remains among the world’s most attractive destinations for investors seeking a haven after an auction of government bonds was more than 10 times oversubscribed.

Matching a previous record set in June and illustrating the stability of the government’s finances, Britain attracted £110bn of bids on bonds worth £8bn.

Considered the first big test of the Labour government’s reputation with foreign investors, the bond sale showed there was a queue of fund managers ready to lend to the UK.

Some ministers are known to have been concerned that Liz Truss’s mini-budget debacle and the dramatic increase in borrowing costs that followed had done irreparable harm to the UK’s reputation on international money markets.

On Monday, the leader of the Commons, Lucy Powell, said the UK might have suffered a run on the pound and an economic crash had the Labour government not imposed spending cuts when it took office, including winter fuel payments for millions of pensioners.

Powell said there was “no alternative” and the decision was needed to avoid an economic catastrophe, but she faced criticised for the claims.

The government borrowed £51.4bn in the financial year to July 2024. This was £500m less than during the same four months of the previous financial year, but £4.7bn more than forecast in March 2024 by the Office for Budget Responsibility, the Treasury’s independent forecaster.

While this overshoot is expected to force the chancellor, Rachel Reeves, to increase taxes or cut spending in her first budget next month to meet fiscal rules that she has adopted from the previous Tory government, to have debt falling as a share of GDP in five years, it is considered a relatively small deficit by investors.

Plans by the Bank of England to offload £100bn of its stock of UK debt, selling it on the open market over the next year, could complicate the situation by increasing the supply of bonds for sale.

However, the huge scale of the demand during the auction for UK debt, whereby pension funds and other institutions lend money to the UK government, appears to have allayed fears of an investor strike.

The chancellor has said that although spending will be tightly controlled in the budget, it would be “reasonable for the government to borrow to invest”.

Analysts said the strong demand also followed a rise in the interest rates on UK debt compared with major G7 economies, driven in part by expectations that the Bank of England will maintain higher interest rates over the next few years than the US Federal Reserve or European Central Bank.

They said regular weekly bond auctions have also shown no shortage of bidders.

The Debt Management Office (DMO) said it would issue £8bn from the sale of the gilt, which has a coupon of 4.375% and matures in January 2040.

In June, a 10-year gilt sold via syndication also attracted orders of about £110bn.

The DMO reported that domestic investors were allocated 73% of the debt sold in the auction, a lower share than usual, suggesting strong foreign demand for UK debt.

The DMO’s chief executive, Jessica Pulay, said: “It was particularly encouraging to witness such a broad range of high-quality investors participating in today’s offering.”