Budget worries hit UK debt sales as investors ‘lose patience with uncertainty’
Demand for UK government debt has weakened this week, as pressure builds on the government ahead of the autumn budget.
A sale of nine-year UK bonds this morning has attracted fewer bids than a similar tender back in July.
The UK debt management office succeeded in selling £1.25bn of nine-year bonds, which mature in 2034 – but at a higher cost, and with fewer bids than two months ago.
The 2034 gilts have been sold at a bid-to-cover ratio of 2.90 and an average yield of 4.584%. July’s £1.5bn sale of this bond was more popular – with a cover ratio of 3.32 – and an average yield of 4.553%. That means today’s auction was less over subscribed, which meant London has to accept a higher interest rate on the bonds.
This follows disappointing auctions earlier this week – sales of five and 30-year bonds this week both saw measures of demand hit the lowest in at least two years, Bloomberg reports.
Bond investors are waiting for Rachel Reeves’s budget, in late November, to find how the chancellor will keep within her borrowing rules.
Lale Akoner, global market analyst at eToro, says the sharp drop in gilt demand shows investors are “losing patience with uncertainty”, adding:
The weak auction demand suggests the market is far from convinced by Reeves’ plans, meaning volatility could persist until the budget provides clarity.
The budget will need to deliver credible fiscal tightening, otherwise the UK risks testing investor confidence further. For income-focused investors, high yields may be tempting, but the risk is that further fiscal slippage pushes borrowing costs even higher. For retail investors, that means gilt yields may stay elevated, offering income opportunities, but the volatility signals caution.
Until the budget lands, the gilt market looks less like a safe haven and more like a barometer of political risk.”
Andy Burnham, Labour mayor of Greater Manchester, has added to the uncertainty around government spending plans by claiming Labour MPs are privately urging him to challenge Keir Starmer to become prime minister, and arguing the government must “get beyond” being in hock to the bond markets.
“We’ve got to get beyond this thing of being in hock to the bond markets,” Andy Burnham told @TomMcTague.
These remarks causing real annoyance inside government.
“What does that even mean? Pay off the debts we owe them quicker by spending less on public services or ignoring…
— Pippa Crerar (@PippaCrerar) September 25, 2025
Key events
XTB: Weak demand for UK debt shows Labour should swerve Andy Burnham
Political risks in the UK is once again spooking the UK’s bond market, reports Kathleen Brooks, research director at XTB.
She writes:
Andy Burnham, the mayor of Manchester, seems keen to replace Kier Starmer as Prime Minister. Although Starmer is unpopular and the government’s approval ratings are through the floor, a change of leadership could exacerbate the UK’s fiscal problems even more. 10-year bond yields are higher by more than 5 bps today, 30-year yields are also rising. Although global bond yields are rising, the UK is the outlier, and is a major underperformer compared to our peers.
Andy Burnham’s rhetoric of nationalizing utilities and questioning why the government needs to be in ‘hock’ to the bond market, has awoken the bond market vigilantes. After protecting Rachel Reeves’ job earlier in the summer, the bond market could save the day for Kier Starmer. The problem with Burnham’s rhetoric is that the UK government needs to be very aware of the bond market, because we have a budget deficit, which has been exacerbated by Labour’s current spending plans. His agenda could widen the deficit and push up borrowing costs even more, which is why bond yields are rising on Thursday.
The weak demand for UK debt is another reason Labour should swerve Andy Burnham, Brooks adds:
Burnham and his leadership bid comes at a bad time for the UK’s bond market. This week has seen weak demand across debt auctions. For example, today’s 9-year debt auction saw demand fall to 2.9 times the amount on offer, down from 3.22 in July. This is not disastrous, but it suggests that sentiment towards UK debt remains fragile.
Stronger yields and better than expected economic data has boosted the dollar on Thursday, which is now the top performer in the G10 FX space, reversing earlier losses. The pound is the second weakest performer, as it struggles once more under the weight of political concerns.
The real reason behind the increase in UK government yields (see earlier post) is economic policy uncertainty, explains Professor Costas Milas, of the Management School at University of Liverpool.
He explains:
Endless/speculative talk about tax increases all the way up to 26 November (Budget date) is fuelling economic policy uncertainty and hitting consumer expenditure and business planning.
Add to this the rise in political uncertainty (will Starmer’s authority be challenged soon?) and you have the unpleasant situation where financial markets demand higher returns to trust and therefore lend money to the UK government.
This is far from over. We run the risk of witnessing a further increase in our borrowing costs through a downgrade of our sovereign credit score by credit ratings agencies. This is because existing co-authored academic work of mine in the Journal of International Money and Finance shows that credit rating agencies penalise economic policy uncertainty at least as much as big fiscal imbalances!
Wall Street opens in the red.
A third straight day of losses is on the cards in New York.
The Dow Jones industrial average has dropped by 203 points, or 0.44%, in early trading to 45,917 points.
Tech stocks are under pressure, as fears that AI enthusiasm may have pushed the market too high, pulling the Nasdaq index down by 1.2%.
Oracle is among the big fallers, down 5%, as enthusiasm over its tie-up with OpenAI fades.
The Unite union says it is challenging management at manufacturing company Linamar, based in Dunmurry, near Belfast, over proposals to lay off 40 temporary, agency workers.
Linamar are a supplier to Jaguar Land Rover, according to Unite, who insist they shouldn’t pay the price for the carmaker’s cyber-attack.
General secretary Sharon Graham said,
Linamar workers cannot be expected to pay the price for this cyber-attack.
Given the expectation of UK government intervention to safeguard jobs and skills – there is no justification for any lay-offs at Linamar.
Unite regional officer Norman Cunningham said:
Linamar workers and their families face an immediate threat of redundancy and a financial cliff-edge. Financial support for the JLR supply chain must be swiftly is delivered to avoid workers being forced on to benefits.
UK bond yields on the rise
UK government borrowing costs are climbing again today.
The yield, or interest rate, on 10-year UK gilts is up 5 basis points at 4.726%, their highest level since early September.
30-year gilt yields are up 5.5bps at 5.54%, towards the 27-year high (5.75%) hit a few weeks ago.
Bond yields rise when price fall. Rising yields on long-dated bonds suggests investors are losing faith in a government’s long-term financial credibility.
Today’s selloff could have several causes, such as the weaker demand for today’s auction of short-dated bonds, or Andy Burnham’s argument that the bond market shouldn’t dictate government policy.
The dollar is rallying, as investors calculate that today’s strong jobless claims and GDP data make interest rate cuts less likely.
This has pushed the pound below $1.34 for the first time in three weeks; the euro has hit a two-week low at $1.17.
In a second piece of encouraging US economic data…. fewer Americans filed claims for unemployment support last week.
US jobless claims fell to 218,000 in the week to 20 September, down from 232,000 in the previous week.
That suggests American firms continued to hold onto staff, despite signs that hiring has slowed sharply this summer.
US Q2 growth revised up
Newsflash: The US economy grew more rapidly than previously thought in the second quarter of this year.
US GDP expanded at an annual rate of 3.8% in April-June, the Bureau of Economic Analysis has reported, up from a previous estimate of 3.3%.
That equates to quarterly growth of around 0.95%.
It follows a contraction of 0.6% (annualised) in January-March.
The BEA says:
The increase in real GDP in the second quarter primarily reflected a decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending. These movements were partly offset by decreases in investment and exports.
The Q1 contraction was caused by a surge of imports as American firms tried to stock up on goods before Donald Trump’s tariffs were announced in early April.
Over in America, Donald Trump’s man at the Federal Reserve is calling for steep cuts to interest rates.
Stephen Miran, newly appointed Fed governor, told Fox Business’ Mornings with Maria program that the U.S. economy is more vulnerable to shocks right now due to high interest rates (which were cut for the first time in 2025 last week).
Miran argues there are unfounded inflation concerns among Federal Reserve policymakers, and believes the policy rate should drop 2 percentage points in half-point cuts.
He says:
When monetary policy is in that restrictive stance, the economy becomes more vulnerable to downside shocks.
He argued there was no sign tariffs were driving inflation, but “that’s what’s holding up a lot of my colleagues.”
Economists, though, have warned that the impact of tariffs has yet to fully feed through the economy….
The pound has dipped to a three-week low this morning, adding to yesterday’s losses.
Sterling is down by a quarter of a cent against the US dollar, at $1.3417, the lowest since 4 September.
“There are signs of weakness from a couple of recent gilt auctions suggesting investor doubts creeping in ahead of the Budget,” says Saxo UK investor strategist Neil Wilson.
Stephen McPartland, the former UK minister of state for security who wrote the McPartland Review into Cyber Security, is urging UK businesses to protect themselves against cyber threats.
McPartland says:
The Co-Op’s staggering losses show that even a multi-billion pound business lacks the requisite defences to withstand the increasingly sophisticated nature of cyber crime. Sadly, many smaller businesses in the Co-Op’s supply chain simply do not have the cashflow to survive such shocks.
Cyber resilience must now be treated as a fundamental part of the UK’s economic infrastructure – protecting jobs, communities, and Britain’s competitiveness.
Boards must embrace cyber awareness, equipping their organisations with the tools and strategies needed to fend off attacks.
Budget worries hit UK debt sales as investors ‘lose patience with uncertainty’
Demand for UK government debt has weakened this week, as pressure builds on the government ahead of the autumn budget.
A sale of nine-year UK bonds this morning has attracted fewer bids than a similar tender back in July.
The UK debt management office succeeded in selling £1.25bn of nine-year bonds, which mature in 2034 – but at a higher cost, and with fewer bids than two months ago.
The 2034 gilts have been sold at a bid-to-cover ratio of 2.90 and an average yield of 4.584%. July’s £1.5bn sale of this bond was more popular – with a cover ratio of 3.32 – and an average yield of 4.553%. That means today’s auction was less over subscribed, which meant London has to accept a higher interest rate on the bonds.
This follows disappointing auctions earlier this week – sales of five and 30-year bonds this week both saw measures of demand hit the lowest in at least two years, Bloomberg reports.
Bond investors are waiting for Rachel Reeves’s budget, in late November, to find how the chancellor will keep within her borrowing rules.
Lale Akoner, global market analyst at eToro, says the sharp drop in gilt demand shows investors are “losing patience with uncertainty”, adding:
The weak auction demand suggests the market is far from convinced by Reeves’ plans, meaning volatility could persist until the budget provides clarity.
The budget will need to deliver credible fiscal tightening, otherwise the UK risks testing investor confidence further. For income-focused investors, high yields may be tempting, but the risk is that further fiscal slippage pushes borrowing costs even higher. For retail investors, that means gilt yields may stay elevated, offering income opportunities, but the volatility signals caution.
Until the budget lands, the gilt market looks less like a safe haven and more like a barometer of political risk.”
Andy Burnham, Labour mayor of Greater Manchester, has added to the uncertainty around government spending plans by claiming Labour MPs are privately urging him to challenge Keir Starmer to become prime minister, and arguing the government must “get beyond” being in hock to the bond markets.
“We’ve got to get beyond this thing of being in hock to the bond markets,” Andy Burnham told @TomMcTague.
These remarks causing real annoyance inside government.
“What does that even mean? Pay off the debts we owe them quicker by spending less on public services or ignoring…
— Pippa Crerar (@PippaCrerar) September 25, 2025
Mike Hawes, the head of Britain’s automotive trade body SMMT, has said the JLR cyberattack’s impact on the supply chain and wider industry on which it depends was “severe and of indeterminate duration”.
He said in an emailed statement to Reuters that SMMT was working with JLR, the government and suppliers to identify what additional supportive measures might be needed.
Better news for the London stock market: Ebury, the payments company backed by Spanish banking giant Santander, is reportedly drawing up plans to revive a £2bn London flotation in the first half of next year.
Sky News say Ebury’s board and its investment banking advisers have tentatively pencilled in the second quarter of 2026 to resurrect an initial public offering of the business.
A timely addition to the stock market, with Goldman Sachs-backed Petershill Partners planning to delist (see earlier post). Petershill’s shares have jumped by 33% this morning.
Reform urge Bank of England to end bond sales
Heather Stewart
Reform leader Nigel Farage has stepped up calls for the Bank of England to halt bond sales and cut the interest it pays to UK banks, after a meeting with its governor Andrew Bailey.
Farage met Bailey on Thursday morning at the Bank’s Threadneedle Street headquarters with Reform MP Richard Tice, after the governor reportedly requested their first formal meeting.
The pair would like to see politicians take a firmer grip on the operation of the institution, made independent by Gordon Brown when he was chancellor, in 1997.
In a statement released after the meeting, Tice said:
“If parliament via the chancellor of the exchequer gave a different steer to the Bank of England this could significantly reduce the need for tax rises at the budget.
“Subsequently I will be writing to the chancellor and the Leader of the House requesting an urgent debate as soon as Parliament returns.”
The Bank currently pays interest on the vast bank reserves created during the emergency policy of quantitative easing (QE). It is also in the process of running down the stock of government bonds it bought through QE, in a programme known as quantitative tightening (QT).
Critics, including Reform, have pointed out that these bonds are currently being sold at a loss…
Tesla’s EU sales down 43% so far this year
Lisa O’Carroll
Europe’s back has been turned on Elon Musk with new figures showing sales of new Tesla cars have fallen by 43% across the EU so far this year.
At the same time sales of Chinese brand BYD are soaring with the number of cars sold this year so far up 244% compared to the same eight-month period last year.
New data from the European car trade body, ACEA, shows that just 86,000 new Teslas were sold from January to August compared to more than 150,000 in the same period last year. BYD, overtaking Tesla for the second month running, saw sales jump from just under 20,000 in the first eight months of 2024 to just under 70,000 this year so far.
The new data comes a year after the EU imposed tariffs on Chinese electric vehicles (EV) in a bid to curb their take up and the decline of European rivals.
On Thursday, Sabine Weyand, the director general of trade at the European Commission ,told the European parliament international trade committee that the tariffs were having the desired effect.
“200,000 cars were exported to the EU after measures, we cannot be accused of closing the market [to China,” she said adding that at the same time EV production in Europe was up 19% with sales up 28%.
The tariffs, she told MEPs, were not designed to shut down sales of Chinese vehicles but give the EU industry the space to catch up on production.
ACEA figures show EVs now account for around 16% of the EU market but sales of hybrid cars continue to soar, now accounting for 37% of the market. This is driving the German car manufacturers to lobby, backed by chancellor Friedrich Merx, for “flexibility” on the EU’s 2035 net zero emissions. They argue they should continue to be allowed sell hybrid cars beyond that date.
CMA secures changes from Ticketmaster following Oasis tickets investigation
Newsflash: ticketing company Ticketmaster has agreed various undertakings to protect music fans from a repeat of the debacle around the Oasis ticket sale last summer.
The Competition and Markets Authority says thes new measures will have “the information they need when they spend their hard-earned cash to see the artists they love”.
The undertakings come after the CMA threatened Ticketmaster with legal action, for selling “platinum” Oasis tickets at almost 2.5 times the price of standard equivalent tickets, without sufficiently explaining that they did not offer any additional benefits, and for not warning fans there were two categories of standing tickets at different prices.
Ticketmaster has now pledged to:
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tell fans 24 hours in advance if a tiered pricing system is being used (as it was for Oasis standing tickets). This means fans will know beforehand if there are multiple prices for the same type of ticket, and that more expensive ones will be released once the cheapest sell out.
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provide more information about ticket prices during online queues, helping fans anticipate how much they might have to pay. This includes setting out the range of prices available for the event when people join the queue and updating fans swiftly when the cheaper tickets sell out. Additional information to help fans make the best decisions for them will also be given about the prices of tickets sold using tiered pricing.
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not use any misleading ticket labels. Ticketmaster will ensure that tickets are described accurately and do not give the impression that one ticket is better than another when that is not the case.
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provide regular reports to the CMA. Ticketmaster will regularly report how it has implemented the undertakings over the next 2 years to ensure robust compliance. Failure to take forward these measures could result in enforcement action.
Sarah Cardell, chief executive of the Competition and Markets Authority, says:
Fans who spend their hard-earned money to see artists they love deserve to see clear, accurate information, upfront. We can’t ensure every fan gets a ticket for events as popular as the Oasis tour, but we can help ensure that next time an event like this comes along, fans have the information they need, when they need it.
The changes we’ve secured will give fans more information about prices and clear descriptions of exactly what they are getting for their money. If Ticketmaster fails to deliver on these changes, we won’t hesitate to take further action.
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