UK 30-year gilt yields reached 6% for the first time since 1998

Long-dated UK borrowing costs reached a level last seen in February 1998 on Thursday, as a global bond selloff lifted the 30-year gilt yield to 6% and the 10-year gilt to 5.52%, while the FTSE 100 ended the week about 2.4% lower. For clients that shows up as lower valuations on the gilts and bond funds they already hold, more income on new money and annuity quotes, and a housing backdrop that Nationwide says has already cooled to 0.8% annual price growth.

Last week in numbers

Market	Level (Thu close)	Note
FTSE 100	10,423.66	Down about 2.4% on last Thursday's 10,679.99
FTSE 250	24,150.03	Flat on last Thursday's 24,154.32, after falling back on Thursday
S&P 500	7,660.99	Down about 0.6% on last Thursday
Stoxx Europe 600	629.12	Down about 1.2% on last Thursday
Nikkei 225	68,956.72	Up about 5.3% on last Thursday, the biggest move of the week
MSCI Emerging Markets	1,705.43	Down about 1.5% on last Thursday
UK 10-year gilt yield	5.52%	Up 0.14 percentage points on the week. The 30-year reached 6%, its highest since February 1998
US 10-year Treasury yield	5.34%	Up 0.13 percentage points on the week
Bank Rate / Fed funds	3.75% / 3.75% to 4.00%	Bank Rate held on 17 September by six votes to three. The Fed raised by 0.25 points on 16 September
GBP/USD	1.3264	Up about 0.3% on the week. As at the 30 September close, the latest available
Brent crude	$101.05	Down about 5.2% on last Thursday's $106.60
Gold	$4,188.10	Down about 2.6% on last Thursday's $4,298

All figures are as at Thursday 1 October close unless the note says otherwise.

What happened

Long gilt yields reached 6% for the first time since 1998. The 30-year gilt yield touched 6% on Thursday, a level last seen in February 1998, and the 10-year gilt yield ended the day at 5.52%, up 0.14 percentage points on last Thursday. This was a global move rather than a UK one, with the US 10-year Treasury yield closing at 5.34%, up 0.13 points. Reporting on the day put it down to energy-driven inflation worries, government borrowing and the scale of planned spending on AI data centres, which has led bond desks to assume a higher resting level for interest rates.

_Client impact: gilts and bond funds already held are worth less than they were, while new money and annuity quotes buy more income than they did a year ago._

The Bank of England said the chance of financial vulnerabilities crystallising has risen. The record of the Financial Policy Committee's 25 September meeting, published on Wednesday, holds the UK countercyclical capital buffer at its neutral setting of 2%. The Committee said gilt and US Treasury yields had reached levels not seen since 2008, that borrowing by hedge funds in the gilt market had been stable but remained high, and that equity valuations for AI companies fell sharply in July, leaving the risk of a sharper correction that spills into core markets.

_Client impact: this is the Bank describing the weather rather than forecasting a storm, and it is a fair answer to a client asking whether the bond moves point to something worse._

UK growth was revised up and households put more aside. The ONS quarterly national accounts, published on Wednesday, revised second quarter GDP growth up by 0.1 percentage points to 0.5%. The households' saving ratio rose by 0.2 points to 8.8%, driven by non-pension saving, and real household disposable income per head rose 1.0% after a fall of 0.8% in the first quarter. Household consumption grew 0.3% in the quarter. Incomes recovered and spending did not keep pace, which is the arithmetic behind the higher saving ratio.

_Client impact: more household income is sitting in cash, where the return after inflation is a reasonable thing to check at the next review._

House price growth halved in September. Nationwide's index, published on Thursday, put annual house price growth at 0.8%, down from 1.6% in August, with prices 0.2% lower on the month on a seasonally adjusted basis. The average UK house price was £274,251. Nationwide's chief economist said underlying affordability is improving because house price growth has been well below earnings growth, and that activity should regain momentum providing the energy shock fades and confidence returns, particularly if market interest rates fall back. With long yields where they are, that last condition is doing a lot of work.

_Client impact: slower price growth changes loan to value assumptions for anyone remortgaging, downsizing or looking at equity release._

The week ahead

Day	Event	Why it matters
Mon 5 Oct	US ISM services PMI for September, estimate 54 against 55.4	The services side is what the Fed is watching after raising rates
Tue 6 Oct	UK construction PMI for September, estimate 45.5 against 44.3	Still below 50, so a read on how far domestic activity has slowed
Wed 7 Oct	UK house price index for September, and the BBA mortgage rate, previously 6.58%	Follows Nationwide's slowdown and feeds straight into mortgage conversations
Wed 7 Oct	Minutes of the Federal Reserve's 15 to 16 September meeting	The detail behind the first US rise since 2023
Thu 8 Oct	ECB monetary policy meeting accounts, and a US 30-year bond auction, previously 5.308%	Appetite for long-dated government debt is this week's live question
Fri 9 Oct	Michigan consumer sentiment for October, estimate 48.6 against 48.1	A weak reading would keep the stagflation argument going

Two to watch. Thursday's US 30-year auction is the clearer test: after a week in which long yields set records on both sides of the Atlantic, the price investors demand for thirty-year money will show whether this is a repricing or a buyers' strike, and gilts tend to follow Treasuries at the long end. Wednesday's Fed minutes matter for a different reason, because the September rise was unanimous and the Committee's own projections point to the possibility of another this year.

Adviser corner: the pension age rise and the clients caught near the line

The normal minimum pension age rises from 55 to 57 on 6 April 2028. HMRC consulted over the summer on draft transitional regulations, and that consultation closed at 11:59pm on Monday 28 September. The draft would treat members who were aged 55 or 56 on 5 April 2028 as having reached 57 immediately before certain payments are made, so those payments stay authorised for tax purposes where the entitlement arose before the rise. It covers certain pension income payments, stand-alone lump sums, pension commencement lump sums, pension commencement excess lump sums and trivial commutation lump sums. A practical step while the final rules are awaited: run a list of clients born between 6 April 1971 and 5 April 1973 and note which hold a protected pension age, so the review calendar reaches them in good time. What this means for any individual depends on their own circumstances and scheme rules.

_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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