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The Guardian
· collected 2026-10-01 · by Phillip Inman and Graeme Wearden
Global bond markets are experiencing increased turmoil due to fears over unsustainable US deficits and rising oil costs leading to potential inflation. In this context, UK long-term borrowing rates reached 6% for the first time since 1998, affecting stock markets and pressuring Chancellor John Healey ahead of an upcoming budget. The sell-off is driven by concerns about central bank rate hikes in response to inflation worries, impacting not only UK bonds but also those in the US and Japan.
Written locally by qwen2.5:14b on 2026-10-01,
using this article's own text rather than the other coverage of the
same event (that is the story summary below).
Story summary
UK's long-term borrowing costs reached a 28-year high of 6% on Thursday, surpassing the level seen during the eurozone crisis, amid global bond market turmoil. This has significantly increased government borrowing expenses and put pressure on Chancellor John Healey ahead of the budget announcement later this month. The yield on five- and ten-year UK bonds also rose, with the FTSE 100 index falling by 2% in early trading. Similar sell-offs were seen across Europe, affecting Germany’s Dax and France’s CAC 40 indices as well. Rising borrowing costs will limit the government's flexibility to fund essential spending areas like social care and defense amid heightened inflation fears driven by persistently high oil prices.
Written for “UK Bond Market Rout” on 2026-10-04,
grounded in this article and the 3 other(s) covering the same event.
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.
asserted
deficit → intensify → 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 rates in the coming months to prevent price increases from becoming embedded.
asserted
banks → renew → increases
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.
asserted
which → hit → 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.
asserted
yield → rise → budget
Stock market investors also sold heavily, knocking 1.7% off the London stock market in early trading.
asserted
investors → sell → trading
Bourses in Europe were also hit, with Germany’s Dax and France’s CAC 40 falling by 1.1%.
asserted
Dax → hit → %
“There is carnage in the bond market which is hitting stocks hard,” warned Neil Wilson, Saxo UK Investor Strategist.
asserted
Wilson → be → stocks
“It looks like the relentless rout in the bond market is sending investors running for cover.”
asserted
rout → look → cover
The bond sell-off around the world is being driven by fears of high inflation, as the Middle East conflict continues to restrict oil supplies from the region.
asserted
conflict → drive → region
On Wednesday, US 10-year Treasury yields hit their highest level since 2002, while Japan’s 10-year yield rose towards the 30-year high set last month.
asserted
yield → hit → high
US bonds weakened despite inflation data on Wednesday coming in lower than forecast, which was expected to calm investors’ nerves about the prospect of further increases in the cost of borrowing by the US Federal Reserve.
asserted
which → weaken → Reserve
Traders remain anxious that the Federal Reserve will continue to raise interest rates to fight inflation, mainly in response to the strength of the economy and the prospect of workers bidding up their wages.
asserted
workers → remain → wages
Mohit Kumar, an economist at Jefferies, said there was growing concern at the amount of debt being issued to fund government deficits, as well as inflation concerns.
asserted
Kumar → say → deficits
“Inflation, deficit and issuance concerns continue to weigh on the bond market,” he said.
asserted
he → continue → market
“There is also a buyers’ strike as investors do not want to step in till we get some form of stability.
asserted
we → be → stability
Hedge funds have suffered in the latest round of sell-off and do not have the risk appetite to fade the move.
asserted
funds → suffer → move
Real money, potentially has the risk appetite, but won’t step in till we get some stability.”
asserted
we → have → stability
Axel Rudolph, the chief technical analyst at the investing and trading platform IG, said: “While the latest data has reduced expectations of an October Fed rate hike, investors remain wary that persistent inflation and higher oil prices could keep rates elevated for longer.
uncertain
inflation → say → rates
“The dollar is benefiting from that caution, climbing to a three-month high, while the prospect of a December rate increase keeps pressure on bond markets.”
asserted
prospect → benefit → markets
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