Gilt yields rose again as the Bank of England said bond markets now lean more on investors who borrow

The UK 10-year gilt yield closed at 5.48% as at Thursday 8 October close, up 0.08 percentage points on the week, while the Bank of England's Governor used a speech in Istanbul to say government bond markets now lean more on investors who borrow to take positions, and that those positions can be unwound quickly. Equities were firmer, with the S&P 500 up 1.54% on the week and the FTSE 100 a little lower on the day, oil rose and gold gave back some of its recent gains, and the FCA opened a consultation that would put a 90 day notice period on funds holding property and infrastructure.

Last week in numbers

Market	Level (Thu close)	Note
FTSE 100	10,441.37	Down 0.16% on Thursday
FTSE 250 ex investment trusts	24,705.05	UK mid caps as at Thursday's close
S&P 500	7,784.47	Up 1.54% on last Thursday
Stoxx Europe 600	628.29	Up 0.26% on last Thursday
Nikkei 225	69,042.11	Up 0.12% on last Thursday
UK 10-year gilt yield	5.48%	Up 0.08 percentage points on the week
US 10-year Treasury yield	5.34%	Up 0.09 percentage points on the week
Bank Rate / Fed funds	3.75% / 3.75% to 4.00%	Bank Rate held on 17 September, the Fed raised by 25 basis points the same day
GBP/USD	1.3214	Up 0.12% on the week
Brent crude	$104.64	Up 2.28% on the week
Gold	$4,147.30	Down 1.31% on the week

What happened

Gilt yields went up again. The UK 10-year gilt yield closed at 5.48% as at Thursday 8 October close, up 0.08 percentage points on the previous Thursday, with the US 10-year Treasury yield up 0.09 points at 5.34%. Bank Rate has been 3.75% since the Monetary Policy Committee held it on 17 September, so the move is coming from the long end, not the policy rate. That matters twice over for portfolios: it marks down longer dated bond holdings, and it keeps fixed rate mortgage and annuity pricing under upward pressure.

_Client impact: a client remortgaging or buying an annuity in the next few months is pricing off these yields, not off Bank Rate._

The Governor said market resilience cannot be assumed. In a speech at the Istanbul Economic Forum on Thursday 8 October, the Bank of England's Governor said traditional demand for long dated government debt has declined while investors who borrow to take positions now play a much larger role, and that such positions can be unwound rapidly and amplify market moves. The speech added that central banks can look through a one off price shock only if inflation expectations stay anchored, and that fiscal policy must be seen by markets as credible.

_Client impact: it is the official explanation for why a bond fund can move sharply on a day with no obvious news._

The pensions regulator told trustees to act. Speaking at the Professional Pensions Trustee Senate on Thursday 8 October, The Pensions Regulator said about 80% of private defined benefit schemes are in surplus on a low dependency basis, holding an estimated £170 billion of surplus assets, while only 3% remain open to new members. Surplus regulations are expected to take effect next April, and final value for money regulations for defined contribution schemes are due early next year.

_Client impact: clients with an old final salary pension may hear from their scheme about its long term plans, and will ask what it means for them._

Oil rose and gold gave some back. Brent crude closed at $104.64 as at Thursday's close, up 2.28% on the week, while gold closed at $4,147.30, down 1.31%. Equities were firmer, with the S&P 500 up 1.54% on the week and the Stoxx Europe 600 up 0.26%, while the FTSE 100 finished Thursday 0.16% lower at 10,441.37.

_Client impact: a higher oil price feeds through to fuel and energy bills, which is the part of inflation clients notice first._

The week ahead

Day	Event	Why it matters
Mon 12 Oct	Two Bank of England speeches, and the BRC retail sales monitor for September	A first read on the high street, and on how the committee is leaning
Tue 13 Oct	Bank of England speech, OPEC monthly report	Oil supply commentary after a week when Brent rose
Wed 14 Oct	US CPI for September, consensus 3.6% against 3.4% last time	US rate expectations have been setting the tone for gilts
Thu 15 Oct	UK monthly GDP for August, three month average expected at 0.2%	Feeds the growth and borrowing debate before the Budget
Fri 16 Oct	Speech by the Governor of the Bank of England	The clearest signal available before the November decision

Two to watch. US CPI on Wednesday, because the consensus already looks for the annual rate to pick up to 3.6%, and gilt yields have been tracking Treasuries closely. UK monthly GDP on Thursday is the other, with the three month average expected at 0.2% against 0.4% last time: a weaker figure feeds the argument that growth is too soft to carry higher borrowing costs, a stronger one hardens the case for tighter policy.

Adviser corner: the FCA's notice period plan for illiquid funds

The FCA published consultation paper CP26/35 on Thursday 8 October. It proposes that investors in non-UCITS retail schemes holding inherently illiquid assets, such as property and infrastructure, give 90 days' notice before taking money out, with a longer period where the strategy requires it. Existing funds would have two years to comply and must give at least one year's notice, and the consultation closes on 11 December 2026. The practical step is a process one: list which client portfolios hold funds of this type, check what access period your cash flow models assume, and note where a 90 day wait would change a planned withdrawal. Whether anything needs doing depends on 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

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