Gilt yields climb again as rate-rise talk returns on both sides of the Atlantic

UK and US government bond yields rose again this week as higher oil prices and a Federal Reserve rate rise revived talk of further increases, with three Bank of England members already voting for one. The FTSE 100 fell 1.3% over the week, with its oil majors softening the fall, while domestic UK shares felt more of the strain as growth cooled and costs rose.

Last week in numbers

Figures are as at the Thursday 24 September close, with the change on Thursday 17 September.

Market	Level (Thu close)	Note
FTSE 100	10,679.99	Down 1.3% on the week
FTSE 250	24,154.32	Down about 0.8%, including 0.9% on Thursday alone
S&P 500	7,704.13	Up 0.9%
Stoxx Europe 600	636.43	Down 1.0%
Nikkei 225	65,513.99	Up 2.1%, with Tokyo shut Monday to Wednesday
MSCI Emerging Markets	1,732.19	Up 2.6%
UK 10-year gilt yield	5.38%	Up from 5.22%
US 10-year Treasury yield	5.21%	Up from 4.94%
Bank Rate / Fed funds	3.75% / 3.75% to 4.00%	The Fed raised rates on 16 September; the Bank held on 17 September
GBP/USD	1.3209	Sterling down 1.1% against the dollar
Brent crude	$106.60	Up 1.7%
Gold	$4,298/oz	Down 2.3%

What happened

1. Borrowing costs rose again. Government bond yields climbed on both sides of the Atlantic. The US 10-year Treasury yield rose from 4.94% to 5.21% over the week, and the UK 10-year gilt yield from 5.22% to 5.38%. The Federal Reserve raised its rate range to 3.75% to 4.00% on 16 September, its first rise in more than three years, and its median projection points to one more this year. Gilt yields feed through to fixed-rate mortgage pricing and annuity rates. Client impact: bond fund values fall when yields rise, but money invested now locks in a higher income.

2. The Bank of England moves closer to a rise. The Bank held Bank Rate at 3.75% on 17 September, but three of its nine members voted to raise it to 4%. August CPI was 3.1%, and the Bank expects inflation to reach slightly above 4% in early 2027 as energy costs pass through. On Thursday Deputy Governor Clare Lombardelli said policy is "increasingly likely" to need to tighten if energy prices stay high. Client impact: cash and money market returns may stay higher for longer, and borrowers coming off fixed rates should plan for higher repayments.

3. UK growth is cooling while costs rise. The September flash composite PMI fell to 51.7 from 52.5, its lowest in three months, and S&P Global said output is growing at a pace consistent with only around 0.1% a quarter. Input costs rose at their fastest since June on energy and fuel, and private sector employment fell for a 24th month, although business optimism held at August's six-month high. Client impact: companies that earn most of their money in the UK, which make up much of the FTSE 250, are more exposed to this than the internationally focused FTSE 100.

4. Oil cushions the FTSE 100. Brent crude rose above $106 a barrel on Thursday on Middle East supply risk. BP gained 2.6% and Shell 1.7% that day, which softened the index's fall while miners, banks and rate-sensitive shares lost ground. Client impact: sector weights shape UK index returns, and this week income portfolios with more energy exposure held up better than those tilted towards growth.

The week ahead

Day	Event	Why it matters
Tue 29 Sep	UK mortgage approvals	How higher rates are reaching the housing market
Tue 29 Sep	US consumer confidence	Whether higher rates are weighing on US households
Wed 30 Sep	UK Q2 GDP final estimate	Any downgrade adds to the slowdown debate before the Budget
Wed 30 Sep	US PCE inflation (core last 3.3%)	The Fed's preferred inflation gauge
Wed 30 Sep	Quarter end	Q3 valuations and client statements
Thu 1 Oct	US ISM manufacturing	The next read on US business activity
Fri 2 Oct	Eurozone flash inflation (last 3.2%)	Pressure on the ECB and on European equity funds
Fri 2 Oct	US non-farm payrolls	Usually the biggest market mover of the week

Two to watch. First, US payrolls on Friday. Markets were pricing around a 75% chance of another Fed rise next month, according to Share Talk's Thursday report; a strong number would support that and could push global yields, gilts included, higher, while a weak one could ease the pressure on bonds. Second, the UK GDP revision on Wednesday. With the Budget on 28 October, a weaker picture narrows the Chancellor's room and feeds into the Bank's November decision.

Adviser corner: the Budget is five weeks away

Chancellor John Healey delivers the Autumn Budget on Wednesday 28 October. Reported options include aligning Capital Gains Tax rates with income tax and ending the CGT uplift on death, but none of this is confirmed. Before acting on rumour, use the next four weeks to identify clients with large unrealised gains, check how much of their annual CGT exemption and ISA allowance they have used, and record any decision to wait. Unused pension funds come within the inheritance tax net from 6 April 2027, so keep that on the review agenda too. The right step depends on each client's individual circumstances.

This article is for information only and reflects market conditions at the time of writing. It is not investment, tax or financial advice and should not be relied on as such. The value of investments and the income from them can fall as well as rise, and investors may get back less than they put in. Past performance is not a reliable indicator of future results. Advisers should consider the suitability of any action for individual clients. Issued by Wealth Analytica.

Sources

Wealth Analytica: Markets, live index, bond, currency and commodity data
Bank of England: Monetary Policy Summary, September 2026
U.S. Bank: the Fed raises rates to 3.75% to 4.00%
Bdaily: Lombardelli on a rate rise, 24 September
ADVFN: UK flash composite PMI falls to 51.7
Share Talk: FTSE 100 and FTSE 250 closes, 24 September
Lemming Investor: London market wrap, 18 September
Investing.com: MSCI Emerging Markets historical data
Which?: Autumn Budget 2026
Index, bond, currency and commodity closes: EOD Historical Data, and the economic calendar for 28 September to 2 October

Every Wealth Analytica article is fact-checked against primary sources where applicable. Read our editorial policy for our sourcing and review standards.