(Bloomberg) -- Pictet Asset Management Ltd says long-dated UK sovereign debt is vulnerable to a selloff, given the next government will likely have to increase public spending and issue more debt to deliver on campaign pledges.

Jon Mawby, co-head of absolute and total return credit at Pictet, anticipates the UK yield curve will steepen after the election as investors price in higher fiscal risk in long-end gilts. The short end, meanwhile, should benefit from interest-rate cuts from the Bank of England.

Mawby’s view pits him against most bond investors, who are betting that memories of the turmoil precipitated by former Prime Minister Liz Truss’ unfunded tax cuts two years ago will deter excessive spending by the opposition Labour Party, which is leading polls by a wide margin. A gauge of UK bond volatility is close to the lowest level in more than two years.

The next government will potentially “either increase taxes quite aggressively, which is not going to be good for the economy, or issue a load more debt and do a Liz Truss and try and get the Bank of England to monetize it,” Mawby said in an interview.

Mawby, who helps to oversee $3.7 billion, thinks the UK bond market’s size leaves it particularly vulnerable to so-called bond vigilantes — a term coined in the 1980s to describe investors who sold Treasuries to push back against the US government’s largesse.

“The UK market is smaller and much more prone to bond vigilante type runs, as we saw with Liz Truss,” Mawby said. “Even with rate cuts you could see instability in the back-end of the yield curve.”

--With assistance from James Hirai.

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