Nov. 6 (Bloomberg) -- Investors will continue to take up issuance of U.K. government bonds next year even as they increase holdings in higher-risk assets, according to Robert Stheeman, chief executive officer of the Debt Management Office.

“It’s quite conceivable that risk appetite will return to the market,” Stheeman said in an interview in Brussels yesterday. “I would expect that there will be a rebalancing, but I don’t think demand will fundamentally go.”

The U.K. plans to sell a record 220 billion pounds ($366 billion) of bonds this fiscal year to fund bank bailouts and economic stimulus programs. The yield on the benchmark 10-year gilt fell 81 basis points to 3.86 percent over the past eighteen months as investors sought the safety of fixed-income assets.

The U.K. will avoid selling dollar-denominated bonds, Stheeman said.

“It’s not government policy to issue in any currency other than sterling to fund the deficit,” he said. “We’ve got a very robust investor base in sterling.”

To contact the reporters on this story: Anna Rascouet in London at arascouet@bloomberg.net

Last Updated: November 6, 2009 06:09 EST