Key events
Closing post
Medium-term borrowing costs for the UK government hit a fresh 19-year high today, as investors continued to offload global bonds amid fears of rising inflation – stoked by the oil price soaring more than 5% at one stage.
Recent dramatic moves in government bond markets have been driven by international factors, but will increase the pressure on John Healey ahead of his first budget as chancellor on 28 October.
The yield, or interest rate, on 10-year UK government bonds jumped as much as 0.07 percentage points (7 basis points) by lunchtime in London, to 5.515%. That was the highest level since July 2007, when the global financial crisis was starting to unfold.
Yields on 20- and 30-year UK government bonds, which are known as gilts, climbed to their highest levels since 1998. Yields go up when bond prices go down. The 20-year gilt yield reached 6% for the first time since March 1998 and the 30-year gilt yield also topped 6%.
The bond selloff has eased somewhat, though, and the 10-year gilt yield is now up 2bps at 5.459%.
Eurozone and US government bond yields also rose sharply earlier today, especially those in France, where the government is under huge pressure to tackle its debt position and pass its 2027 budget.
The French benchmark 10-year bond has dipped slightly to 4.86% while the US 10-year Treasury bond yield is also down a tad, at 5.29%.
Brent crude, the global oil benchmark, leapt more than $5 to over $105 a barrel, and is now trading 4.4% higher at $104.6 a barrel, up $4.43.
Analysts pointed to growing attacks on tankers around the strait of Hormuz, including an attack on a vessel near Qatar yesterday, coupled with cuts to US oil output as a tropical storm approaches and is expected to turn into a hurricane.
UBS analyst Giovanni Staunovo said:
Renewed tensions in the Middle East, with vessel strikes occurring well beyond the strait of Hormuz, have revived concerns about the sustainability of higher transit volumes through the chockepoint.
UK and European natural gas prices also jumped, but the increases later eased.
Thank you for reading. We’ll be back tomorrow. Take care! – JK
Bank of England chief: Fiscal policy ‘must be credible’ to calm markets
Andrew Bailey, the Bank of England governor, has said governments need to double down on fixing their public finances as bond markets around the world have come under strain from high debt burdens and rising inflation pressures.
He said in a speech at a conference in Istanbul organised by Turkey’s central bank today:
Whatever the stance of fiscal policy is, it must be credible and directed at stability, and to be seen to be such by market.
Commitments to rein in debt would help curb demands for higher returns from bond investors when there are negative shocks like the Iran war, he said.
In other words, such commitments are needed more than ever when these negative shocks occur.
He also stressed the importance of central banks’ focus on their main mandate to bring down inflation to the target, of 2% for the Bank of England.
While the recent moves in financial markets were “some way from normal“, they were not at the point of showing stress or illiquidity, he said.
British government bond yields hit their highest levels in decades today as part of a global selloff triggered by a sharp rise in oil prices.
Bailey also expressed concerns that bond markets had become more fragile.
Greater absorption has come with greater fragility. Leveraged positions can be unwound rapidly. Losses can trigger margin calls, model-driven repricing and stop-outs, producing further forced selling that can amplify market moves.
Back to the Asos hack, which happened a couple of days ago.
Lisa Barber, tech editor of the consumer group Which?, says customers’ search history is useful to hackers, so they can launch convincing ‘spear phishing’ attacks.
It’s deeply concerning to learn that hackers have not only obtained customers’ personal details, like email addresses and phone numbers, in the Asos hack, but also their search history.
While many of us would assume that our search history would be uninteresting to a hacker, it can in fact be incredibly useful for criminals hoping to target you with extremely convincing, personalised phishing attacks. This technique, known as ‘spear phishing’, can be hard to spot, as criminals will tailor the communication specifically to you, often using data gleaned from social media accounts and, unfortunately, data breaches.
Shoppers should be especially wary of unexpected phone calls, texts, messages and emails they receive in the coming weeks and months. If you’re ever unsure who you’re speaking with, end the conversation and contact the company directly. Dial 159 to speak to your bank’s fraud team, or use the number on the back of your card. If you have been called by a possible fraudster, wait at least 15 minutes before calling or use a different phone to ensure the scammer is no longer connected to the call.
Eurozone finance ministers, ECB to urge France to pass budget to calm bond markets
Eurozone finance ministers and the European Central Bank will urge France today to pass its 2027 budget to calm bond markets, as French borrowing costs hover at 25-year highs, senior euro zone officials told Reuters.
France is at the centre of a bond market storm, fuelled by worries over the country’s large budget deficit and looming presidential election next year.
Its 10-year bond yield has jumped nearly 80 basis points (bps) since the start of September and hit its highest level since July 2002, just short of 5%. That is driving up the government’s borrowing costs and making things even harder.
Eurozone finance ministers and the ECB meet in Luxembourg this afternoon for monthly talks and the surge in French borrowing costs will be discussed.
But asked if the European Commission or ECB would take any action, a senior eurozone official told Reuters:
I think the clear answer is “no“. I would expect the Eurogroup to recognise that France has all the means to respond. The proper response is to agree on a budget. That’s kind of a no-brainer. So I would expect this to be the main message.
The ECB can buy bonds of a eurozone country on the secondary market if their prices move in an unjustified way to protect the proper transmission of monetary policy. But officials said this does not apply to what is currently happening in France. A second senior eurozone official said:
Everybody has their own mandate. The European Central Bank has a mandate to maintain price stability, and governments have a mandate to maintain the fiscal stability of their countries. Everybody should do their own job.
France said last month that its budget deficit will exceed the government’s target of 5% of GDP this year. It plans to sell a record €340bn of bonds in 2027 to fund the government and refinance Covid-era debt.
Eurozone officials said there was concern about French borrowing because it created conditions for a broader crisis, but added there was no sign of contagion yet to other countries in the currency bloc.
Since the creation of the euro in 1999, France – the European Union’s second biggest economy and a key political player – has only had a budget deficit below the EU’s ceiling of 3% six time.
Supermarket shake-up: why Asda or Morrisons could vanish within a decade
Our retail expert Sarah Butler has also looked at the UK’s big supermarkets.
They may be two of the most recognisable brands in Britain, with a combined 188 years serving shoppers, but industry watchers agree that either Asda or Morrisons – or both – could disappear within a decade.
This week, it emerged that Sainsbury’s and Morrisons – the UK’s second- and sixth-largest supermarket chains – had held merger talks between last November and February, before the larger player decided to walk away.
News of the potential deal has relaunched speculation that the UK grocery market is now ripe for consolidation and revealed that the Sainsbury’s boss, Simon Roberts – who has been in post for six years – is at least willing to consider the possibility of buying one of his troubled rivals.
Sainsbury’s, which has 600 supermarkets and almost 900 convenience stores, has until recently been seen as wary of trying to revive merger talks with its rivals after its bid to buy Asda for £7bn in 2019 was blocked.
However, industry experts say Asda and Morrisons’ owners have held informal talks with each other – and both with Sainsbury’s team – and predict that talks could restart.
“The three of them, one way or another, are talking to each other,” one said. He suggested that a combination of Asda and Morrisons could happen but was likely to be a weaker deal than a Sainsbury’s takeover of either, as both businesses struggle with costs and interest on debt piles.
Here’s our full story on Asos, which has released further details on the hack two days ago:
Meanwhile, gold has fallen to a two-month low.
Gold and crude oil are currently telling two very different stories about the macro backdrop, says Daniela Hathorn, senior market analyst at Capital.com.
Gold remains under pressure near $4,100–4,150 an ounce, weighed down by elevated Treasury yields, a firm dollar and a Federal Reserve that remains reluctant to declare victory over inflation. Brent, meanwhile, has climbed back above $100, with renewed attacks on shipping in the Gulf rebuilding part of the geopolitical premium that had faded as US-Iran negotiations showed signs of progress.
Gold: safe-haven demand vs yields
Gold has struggled to find sustained support despite an increasingly complicated geopolitical backdrop. Prices are trading around $4,130, close to their lowest levels since August and significantly below the late-August peak around $4,650.
The main problem is the bond market. The US 10-year Treasury yield remains around 5.3%, while the 30-year is close to 5.7%. More importantly for gold, real yields are exceptionally high: the Federal Reserve’s latest data put the 10-year inflation-indexed yield around 2.9%. That significantly raises the opportunity cost of holding a non-yielding asset such as bullion.
For many investors, Treasuries can now fulfil part of the defensive role traditionally occupied by gold while simultaneously offering a substantial real return. That helps explain why geopolitical uncertainty has not translated into the kind of sustained gold rally normally associated with an escalation in the Middle East.
Fed hawkishness adds another headwind. Wednesday’s Federal Reserve minutes reinforced the hawkish position. The September meeting produced a unanimous 25bp hike to 3.75–4.00%, and the minutes showed broad agreement that inflation remains too high. The disagreement was less about whether inflation was a problem and more about why rates needed to rise: some policymakers viewed the hike as insurance against energy and other supply shocks, while a more hawkish group worried that price pressures were increasingly becoming demand-driven.
Gilt yields hit decade highs as Brent crude jumps over $5, above $105
Meanwhile, the bond sell-off continues, as the Brent crude oil price jumped more than $5, taking it above $105 a barrel and stoking inflation fears.
Brent is now trading at $105.26 a barrel, an increase of 5.15% on the day.
This has pushed bond yields sharply higher, increasing borrowing costs for the UK government. The benchmark 10-year yield has gone above 5.5%, rising 6 basis points to 5.515%, the highest since July 2007
The 20-year gilt yield has reached 6% for the first time since March 1998 and is up 7bps on the day.
The 30-year-gilt yield has also risen to a new peak, up 6bps at 6.047%, the highest since January 1998.
This will only ramp up the pressure on Andy Burnham and John Healey in the run-up to the budget on 28 October, analysts said.
As AJ Bell’s head of financial analysis Danni Hewson points out:
Rising bond yields are bad news for stocks for several reasons. One is they increase the cost of companies’ own borrowing, which eats into their profitability. Another is that when yields on low-risk government bonds are higher, they compare more favourably with the stock market, which is widely perceived as being a higher-risk option. This makes the latter a less attractive place for people to put their cash.
For consumer-facing businesses there is a further challenge. Higher government bond yields feed into increased mortgage and credit costs, putting the squeeze on their customers and affecting their ability to spend.
Asos tells customers hackers accessed more personal details than first admitted
Hackers gained access to Asos customer names and contact details by impersonating a “trusted contact” to gain access to one of its employee’s accounts, the retailer has said.
Thousands of users of the online fashion seller’s app received a notification on Tuesday titled “Asos hacked” with a link to the Telegram messaging service, sending the company’s shares diving by about 10%.
In a message to customers, the retailer said “sorry for the unauthorised notification” some customers received two days ago. It said its teams, supported by external experts, had undertaken a detailed investigation over the last 48 hours.
The BBC claimed that Asos issued the update after BBC News told the retailer it had been contacted by cyber criminals who said this week’s breach went beyond the “basic contact details” Asos had said might have been accessed.
According to the BBC, this includes searches customers have made on the website, such as “reclaimed vintage”, “glamorous wide fit” and “Asos petite”. With this information, scammers may be able to craft phishing attack emails or phone calls.
Asos insisted that no payment card information or account passwords were accesssed.
Its statement read:
We’re sorry for the unauthorised notification some of you received on 6 October and any uncertainty this caused….
What’s happened
We discovered that an unauthorised party gained access to an ASOS employee account by impersonating a trusted contact to obtain log in credentials. Those credentials were then used to access information on certain third-party platforms used by ASOS. The affected platforms were immediately locked down, ensuring that no further information could be accessed and a full investigation was launched with the support of both internal and external cyber experts.
We are also working with the relevant law enforcement and regulatory authorities.
What this means for you
Our investigation found that the unauthorised party had access to some personal information, including names and contact details, and certain non-personal account related information.
Since we began our internal investigation on 6 October, we have found that:
– No payment card information was accessed
– No account passwords were accessed
– The ASOS website and app were safe to use throughout, and remain safe to use today
There is no action you need to take on your account. However, please remain cautious of unexpected messages or calls claiming to be from ASOS. We will never ask you to share passwords, security codes or payment details through an unsolicited message or call.
UK motorists can now see live fuel prices on Google Maps
Exciting news for UK motorists: drivers will be able to see live petrol prices on Google Maps for the first time from today, in a move that will help motorists shop around for the cheapest fuel.
Millions of motorists will be able to find the cheapest petrol and diesel prices by searching for a local forecourt in the Google app, in what could prove to be “a major development” in making fuel prices more fair, according to campaigners.
The tech company will use data from the government’s Fuel Finder platform, which displays real-time prices at 99% of forecourts, to show Google Map users the cheapest in their local area.
It is expected to make forecourt pricing more transparent and encourage competition between fuel retailers, as millions face record-high road fuel costs due to the global squeeze on supplies prompted by the US-Israel war on Iran. The average price of diesel in the UK recently hit a record £2 a litre, having risen by more than 40% since late February.
UK banknotes to feature barn owls, bumblebees, puffins and hedgehogs
Bees, barn owls, puffins and hedgehogs have been picked to feature on the next generation of banknotes, the Bank of England has announced.
The quartet of creatures were selected after a large-scale consultation settled on wild animals as the theme, with members of the public then asked to pick their favourites out of 18 options divided into three categories.
The buff-tailed bumblebee got the most votes in the insects, fish and amphibian group; the barn owl won the bird division; and the European hedgehog was named top mammal. The Atlantic puffin was added to celebrate Britain’s coastline, the Bank said.
It is as yet undecided which species will adorn which banknote. An image of King Charles will continue to be represented on the other side of the £5, £10, £20 and £50 notes, which are expected to take several years to design.
Victoria Cleland, the Bank’s chief cashier, said:
I am delighted that nearly half a million people responded to our wildlife imagery consultation, showing that cash still matters.
She said the public had chosen “four distinct and inspiring animals” that not only showcased the great variety of wildlife in the UK but would “also enhance the security of our banknotes”.
Wrexham and Rochdale train services rejected over west coast line pressure
Also from our transport correspondent Gwyn Topham:
Plans to run direct train services to Wrexham and Rochdale from London have been rejected by the rail regulator because of “significant pressure” on the line.
The Office of Rail and Road said that there was insufficient space on the crowded west coast main line to introduce the two new separate train services.
It also vetoed plans for additional London-Blackpool train services wanted by Avanti.
The ORR had last year knocked back plans for a new independent open access service linking Wrexham and the capital put forward by the Wrexham, Shropshire & Midlands Railway Company (WSMR). WSMR had submitted plans for a slightly less frequent service but the ORR said the new routes would still put the reliability of the wider railway at risk.
UK’s high court refuses permission to appeal against Dieselgate ruling
Gwyn Topham
London’s High Court today refused claimants permission to appeal against its verdict in the UK dieselgate trial, which broadly found in favour of some of the world’s biggest carmakers.
Lady Justice Cockerill, who in July ruled against most allegations that certain cars were fitted with illegal “defeat devices” that concealed their true emissions, said that claimants would have to apply directly to the Court of Appeal.
The trial, which began in October 2025, was a group action for 1.6 million drivers against 16 car manufacturers, based on test cases against Mercedes, Ford, Renault, Nissan, and Peugeot/Citroën, and potentially extending to claims against many others.
Lawyers for the claimants argued that the cars systems to cut NOx emissions were being effectively “turned down” on the road.
While the judge dismissed most of their claims, her ruling said that “if an alternative approach to the meaning of ‘defeat device’ were taken a larger number of defeat devices would be established, including devices in each of the lead manufacturers cars”.
Law firm Leigh Day, with Pogust Goodhead the joint lead solicitors in the mass claim, has been approached for comment on their next steps.
Sarah Butler
Tracy Gehlan, the president of Subway’s European business, said Subway had enjoyed “the best year we’ve had” with sales up 4.5% at established stores compared to the previous year.
She said growth had been underpinned by investment in a new app and broadening of the product range and Subway now wanted to ensure its fans, most of whom buy their lunch at Subway, did not have to go elsewhere to get breakfast or dinner.
Subway is also testing a new format at one store in London and two in the Netherlands, which will include at least four self-service kiosks, ready-made sandwiches and other ways to pay using a phone. This will go into the 80 new stores expected to open in the UK next year and some existing outlets.
It comes amid heavy competition in the UK on coffee and takeaway food with new competition from Subway’s major US rival Jersey Mike’s, which opens its first UK outlet next month.
Costa, the coffee shop, is expanding its food ranges and Greggs snatched McDonald’s position as the UK’s biggest takeaway breakfast provider in 2024.
Subway takes on Greggs and McDonald’s on breakfast and dinner
Sarah Butler
Away from the markets, Subway is going into battle with Greggs and McDonald’s on breakfast and dinner in the UK as it equips all its franchise partners with coffee machines and aims to launch hot evening food by the end of the year.
The chain, which has about 2,000 outlets in the UK and is best known for its made-to order baguette-style rolls, is launching bacon sandwiches in a newly developed crunchy roll especially for the UK to be sold alongside its new own-label coffee, pastries such as a cinnamon swirl and a relaxing morning playlist laid down for all franchisees.
Subway, which has about 20,000 stores operated by franchisees in its home market of the US, began testing a new evening menu, including foot-long pizza, loaded fries and baked potato, in the Netherlands and is aiming to bring the concept to the UK before the end of 2026.
The new menu and coffee range – which replaces a hotch potch of different coffee options previously dependent on the franchisee, will go into all UK outlets between now and the end of November.
Tracy Gehlan, the president of Subway’s European business, said the breakfast range was “a first for Subway” globally but locally relevant versions were set to go into other markets. She said the chain was “testing different breakfast offerings across different markets” as “the great British bacon roll doesn’t resonate everywhere.”
Subway had decided to offer its own 100% Arabica bean roast as coffee is “one of the fastest-growing drinks” and an improved breakfast range was “what our customers have been asking for”.
She said breakfast currently made up just 2% of Subway sales and it wanted to get that up to between 8% and 10% while about a fifth of sales were via delivery apps, mostly in the evening, which is lower than some rivals where they contribute up to 40% of sales. She added:
We want to offer our customers the opportunity to come to us in all day parts.
UK gilt yields rise, increasing pressure on chancellor
In UK government bond markets, long-dated gilt yields have topped 6% again, increasing pressure on chancellor John Healey before his first budget in about three weeks’ time.
The yield, or interest rate, on the 30-year government bond has risen 3 basis points to 6.0117%, after touching 6.036% on Wednesday, the highest since January 1998.
The 10-year gilt yield meanwhile has risen 5bps to 5.48%, approaching the 5.5% mark, returning to levels not seen since July 2007.
Andrew Wishart, senior UK economist at Berenberg Bank, reckons that gilt yields will drop back next year.
Most of the increase in gilt yields since the pandemic is justified by the return of interest rates to normal levels as policymakers no longer need to set them close to zero to generate sufficient demand. However, the extra increase in yields this year is predicated on four Bank of England interest rate hikes, which we do not think are necessary to prevent another bout of persistent high inflation.
If these lofty expectations are not met, the 10-year gilt yield will probably reverse much of its 2026 surge in 2027. We expect the 10-year yield to drop to 4.7% by end-2027.
