UK 30-year borrowing costs hit 6%, highest since 1998, as government bond sell-off intensifies – business live

Time to wrap up…

The turmoil in global bond markets has intensified amid fears the US deficit is reaching unsustainable levels, helping drive UK long-term borrowing costs to a 28-year high.

The threat of a renewed round of inflation from the persistently high cost of oil has spooked investors, who believe central banks will be forced to raise interest rates in the coming months to prevent price increases from becoming embedded.

In a morning of hectic trading on Thursday, the yield, which is a proxy for the interest rate, hit 6% on Britain's 30-year bonds for the first time since 1998.

The yield on five- and 10-year UK bonds also rose, driving up the government's borrowing costs and adding to the pressure on the chancellor, John Healey, before the budget later this month.

The sell-off also drove US government borrowing costs to 24-year highs on Thursday, with 10-year Treasury bill yields hitting 5.34%.

Thirty-year US Treasury bond yields rose above 5.67%, hitting their highest level since May 2002.

Stock market investors also sold heavily, knocking almost 1.7% off the FTSE 100 in London – its worst daily fall since May. Bourses in other parts of Europe were also hit, with Germany's DAX falling 0.9% and France's CAC 40 losing 1.6%.

Here's the full story:

Goodnight!

Britain's stock market has just suffered its worst one-day loss since May, after a day dominated by troubles in the bond market.

The FTSE 100 share index has closed for the night, down 177 points or -1.68% at 10,428 points.

Tabletop gaming company Games Workshop (-6.2%) and Georgian bank Lion Finance (-5.77%) led the fallers, ollowed by UK banks and builders.

The tumble in government bond prices, which lifted their yields, makes investing in equities less attractive, argues Russ Mould, AJ Bell investment director.

He explains:

“Heightened tensions in the Middle East, concerns over the UK's fiscal situation, and sticky inflation are all feeding into government bond yields, which stand within a whisker of the highest level since 2007, using the 10-year gilt as a benchmark. This is in turn acting as a brake on the FTSE 100, which is making heavy weather of recapturing February's all-time closing high of 10,911 as the gilt yield exceeds the FTSE 100's dividend yield by more than two full percentage points.

“At the time of writing, the 10-year gilt yield is 5.40%, while the dividend yield on the FTSE 100 for 2026 is 3.3%, based on aggregated consensus forecasts for all of the index's members. Any investor who is nervous about the economic outlook and feels that inflation is not about to break out on the upside could start to look toward fixed income and away from equities as a result, especially if they feel their portfolio needs a little capital protection, given how gilts redeem at par upon maturity.

The former hedge fund boss Crispin Odey has been given two weeks to pay a £1.5m fine to the FCA, after deciding not to appeal a court ruling that left him banned from the City for trying to derail investigations into sexual harassment allegations against him.

Odey dragged the Financial Conduct Authority (FCA) to court in March this year, in an effort to have the ban overturned. He ultimately lost that challenge, with judges at the UK's upper tribunal having upheld the FCA's original decision to ban him from holding any senior roles across the UK financial sector last month.

Odey had two weeks to decide whether to appeal the upper tribunal's ruling and pursue another case at the supreme court.

The FCA confirmed on Thursday that Odey has chosen not to appeal the decision and has given him until 14 October to pay his £1.5m fine.

Allegations against Odey by female members of staff came to light after Odey Asset Manament launched an internal investigation into sexual harassment at the business in September 2020. Odey, who resigned in 2023 after the allegations were reported in the media, tried to block executives of his hedge fund from taking any action, including by twice firing its entire executive committee (ExCo).

“He misused his power as controller to remove the ExCos as a means to protect his own interests and attempt to achieve his objectives,†the upper tribunal ruling said last month.

The judges also said the Brexit-backing hedge fund chief failed to acknowledge any potential harm during the March hearing. “He has expressed no contrition,†they said. “He sees nothing wrong with his approach, and indeed he wrongly sees himself as the victim.â€

Consultancy Accenture is bucking the grim mood in the markets today, sending its shares soaring by over 20%.

Accenture cheered its shareholders by reporting that earnings rose 8% in the last year; it says AI is helping it to generate more revenue per employee.

This has eased fears that AI might devour the consultancy sector.

Ouch! US borrowing costs have hit a 24-year high, as investors grow more anxious about inflation, future interest rate rises, and government borrowing levels.

The yield on 10-year Treasuries has hit its highest level since April 2002, hitting 5.344%.

Longer-dated debt is also weakening, wit the yield on 30-year Treasury bills rising over 5.67% and hitting its highst since May 2002.

US yields weakened as the oil price rose 3% today, over $100 a barrel, as investors refused to be cheered by encouraging economic data showing that US job losses remained low and that construction activity continues to rise.

US construction spending has continued to rise, as the AI boom juices demand for data centres.

Construction spending grew at an annualised rate of 0.9% in August, suggesting America's builders remained in demand over the summer.

UK chancellor John Healey has reportedly called in the bosses of Britain's biggest banks for a pre-budget summit.

According to Sky News, the heads of Barclays, HSBC, Lloyds Banking Group, NatWest Group, Santander UK and Nationwide have all been invited to attend the meeting, next Tuesday.

The meeting comes as Healey faces rising pressures to keep within the government's fiscal rules, as the ongoing bond market sell-off pushes up borrowing costs.

There have also been several calls for higher taxes on UK banks, to fund spending commitments such as defence and welfare.

Mortgage brokers are reporting that Barclays has raised the rates on its home loan products, for the second time this week.

David Hollingworth, associate director at L&C Mortgages, says:

“Barclays' latest move highlights just how quickly the mortgage market can change. Rising funding costs are putting pressure on lenders which may lead to further repricing in the weeks ahead. Borrowers who are considering fixing would be wise to act sooner rather than later.

“Rates can be pulled from the market with little or no notice, so securing an option now offers protection against further upward pricing movements, while retaining the flexibility to switch if conditions become more favourable before completion.â€

Wall Street has shrugged off its early anxiety, with stocks slightly higher in early trading.

The Dow Jones industrial average has gained 42 point or 0.08% to 50,948 points, avoiding hitting a three-month low.

The broader S&P 500 index is up 0.2%.

The number of Americans filing new claims for unemployment support remains low.

Just 197,000 new ‘initial jobless claims' – which tracks how many people lost their jobs – were filed last week, a fall of 1,000.

This is the latest sign that the US jobs market remains firm – which could make it easier for the Federal Reserve to raise interest rates to fight inflation….

One of the more hawkish members of the Bank of England's monetary policy committee is continuing to argue for higher interest rates today.

Catherine Mann is telling an audience at the Nomura London Macro Forum that she believes the Bank's current monetary policy stance is not sufficiently tight.

Mann is one of three policymakers who were outvoted by the other six members of the MPC last month, when it left interest rates on hold.

Mann is explaining that the Bank cannot rely on the financial markets to tighten financial conditions, and should bite the bullet by lifting borrowing costs.

She argues that the “rising upside risks to inflation†mean that a risk management strategy to monetary policy is appropriate.

She explains:

As a monetary policymaker, I cannot take comfort from tighter nominal financial conditions when much of that tightening reflects a higher inflation risk premium and, possibly, a monetary policy uncertainty premium that our own decisions and communications may have contributed to.

These premia raise nominal yields without necessarily tightening the real financial conditions that matter for demand and inflation. In my view, real financial conditions are insufficiently tight. The appropriate response therefore is not to rely on risk premia to do the work of policy, but to reduce inflation risk and policy uncertainty through a clearly communicated reaction function and a sufficiently restrictive path for Bank Rate.

With the markets a little calmer, we can focus elsewhere… including on the UK's energy market.

The creation of the country's largest electricity provider has been given the green light by regulators, who have decided not to put German firm E.On‘s takeover of Ovo under more scrutiny.

The Competition and Markets Authority (CMA) has announced that it will not refer the proposed acquisition for a second, more detailed phase of investigation.

The combined company will supply about 9.6 million customers, overtaking the market leader, Octopus, which serves almost 8m homes in the UK.

France is attempting to fend off the bond vigilantes, with a range of belt-tightening fiscal measures.

The French government presented its 2027 budget bill this morning, including a squeeze on spending through freezing public sector wages and all but the lowest pensions, and from curbs on local government budgets, healthcare costs and reduced tax breaks on employers' payroll contributions.

The sell-off in the bond markets has eased a little.

The yield, or rate of return, on UK 30-year bonds has dipped away from the 28-year high hit earlier this morning; it's back below the 6% level, at 5.94%.

This is helping equity markets to recover some of their earlier losses too – the UK's FTSE 100 share index is now down 125 points or -1.2%, having hit a three-month low earlier today.

European stock markets have already hit a three-month low today.

The pan-European Stoxx 600 was down 1.4% at 626.29 points this morning, its lowest level since June.