Uk attracts record orders for government sale despite Starmer coup speculation
Britain has not lost the support of the bond markets, despite the turmoil in Westminster and uncertainty over this month’s budget.
A new auction of inflation-linked UK debt, which matures in 2038, has attracted record demand from investors keen to buy the bonds.
According to Reuters, demand for the UK debt broke the previous record.
They say:
Orders for the 1.75% September 2038 inflation-linked bond topped £69bn, a bookrunner said, beating a previous record of £67.5bn for an index-linked gilt sold via syndication in March.
The bond was priced to give a yield 10.5 basis points above that of the 1.125% index-linked gilt due in 2037.
A large number of orders is usually good news for a bond issuer, who will choose the most attractively-priced offers.
Index-linked bonds protect investors from the rising cost of living, because both the coupon payments (interest on the debt) and the principal payments (the amount actually borrowed, which is repaid when the bond matures) rises or falls in line with inflation.
This strong demand is a sign that the Westminster furore over a possible leadership challenge to Keir Starmer, now denied by health secretary Wes Streeting, has not prompted bond investors to shun UK debt.
As flagged earlier, the price of UK government bonds has dropped today, pushing up the implied cost of borrowing.
But while UK gilts are lagging behind other government debt today, the moves are modest.
Could that be a sign that the bond markets are sanguine about the possibility of defenestation on Downing Street?
Kathleen Brooks, research director at XTB, says:
UK bond yields are marginally higher on the back of this political chaos, the 10-year yield is higher by 2.7bps, and the 2-year yield is higher by 1.7bps. This is a small move and does not compare with the bond market tantrum in the summer when rumours circled that Rachel Reeves would be sacked. The bond yield spike back in July helped Reeves keep her job, the question now is, will a mild reaction to the prospect of Kier Starmer being overthrown as PM embolden his potential successors?
Reeves and Starmer’s swing to the left on public spending and tax rises has been well absorbed by the bond market so far, since a tax increase could build a structural budget surplus for the UK, even if there is a hit to growth. Ironically, this could make Reeves’ and Starmer’s jobs less secure, as the political chaos threatens the UK once again.
Key events
Shares in UK housebuilders have dropped today after Taylor Wimpey reported a pre-budget slowdown in sales (see earlier post).
Taylor Wimpey is one of the top fallers on the FTSE 250 index of medium-sized company shares, down 3.4% today. Berkeley Group are down 2%, and property portfolio Rightmove has lost 1.6%.
AJ Bell investment director Russ Mould says:
“The Budget must surely now be rivalling the Boogeyman as the thing beginning with B which engenders the most fear. Housebuilder Taylor Wimpey is the latest company to bemoan the impact the run up to this fiscal event is having on trading.
A double-digit drop in sales rates in the key autumn period is worse than that reported by rival Barratt Redrow recently, which may raise some questions among investors.
“House prices are proving reasonably resilient, supported by strong underlying supply and demand dynamics, but build costs are continuing to creep up which could put pressure on margins.
“For now, Taylor Wimpey is sticking with its full-year guidance for completions and operating profit.
The US government shutdown doesn’t seem to have dented demand for mortgages.
Mortgage applications to purchase a home rose 6% last week to their strongest pace since September, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 31% higher than the same week one year ago, new MBA data shows.
Although the FTSE 100 has now dippped back from its latest record high, European stock markets have reached new peaks.
The pan-European Stoxx 600 index has gained 0.6% today, led by Germany’s DAX (+1.1%) and France’s CAC 40 (+1.15%).
Financial stocks are leading the rally, as investors welcome a potential end to the historic US government shutdown.
A rise in bond yields and/or sterling’s fall should not come as a surprise following the latest “political” instability, Professor Costas Milas of the University of Liverpool’s Management School tells us:
Rachel Reeves often talks about the importance of “low” bond yields but yields rise or fall minute by minute. The hard evidence of how unimpressed investors have become is elsewhere. The latest OECD data on Foreign Direct Investment (FDI) inflows to the UK are concerning (Table 1 here).
FDI inflows do matter because they represent a measure of long-term commitment of international investors in our economy.
Since Labour came into power, FDI inflows have been extremely volatile. They turned extremely negative (-$25,314mn) in late 2024 before recovering their losses in early 2025 and then losing some of their steam again in mid-2025 (+$7,255 mn). These are concerning times for Reeves (and Starmer).
Uk attracts record orders for government sale despite Starmer coup speculation
Britain has not lost the support of the bond markets, despite the turmoil in Westminster and uncertainty over this month’s budget.
A new auction of inflation-linked UK debt, which matures in 2038, has attracted record demand from investors keen to buy the bonds.
According to Reuters, demand for the UK debt broke the previous record.
They say:
Orders for the 1.75% September 2038 inflation-linked bond topped £69bn, a bookrunner said, beating a previous record of £67.5bn for an index-linked gilt sold via syndication in March.
The bond was priced to give a yield 10.5 basis points above that of the 1.125% index-linked gilt due in 2037.
A large number of orders is usually good news for a bond issuer, who will choose the most attractively-priced offers.
Index-linked bonds protect investors from the rising cost of living, because both the coupon payments (interest on the debt) and the principal payments (the amount actually borrowed, which is repaid when the bond matures) rises or falls in line with inflation.
This strong demand is a sign that the Westminster furore over a possible leadership challenge to Keir Starmer, now denied by health secretary Wes Streeting, has not prompted bond investors to shun UK debt.
As flagged earlier, the price of UK government bonds has dropped today, pushing up the implied cost of borrowing.
But while UK gilts are lagging behind other government debt today, the moves are modest.
Could that be a sign that the bond markets are sanguine about the possibility of defenestation on Downing Street?
Kathleen Brooks, research director at XTB, says:
UK bond yields are marginally higher on the back of this political chaos, the 10-year yield is higher by 2.7bps, and the 2-year yield is higher by 1.7bps. This is a small move and does not compare with the bond market tantrum in the summer when rumours circled that Rachel Reeves would be sacked. The bond yield spike back in July helped Reeves keep her job, the question now is, will a mild reaction to the prospect of Kier Starmer being overthrown as PM embolden his potential successors?
Reeves and Starmer’s swing to the left on public spending and tax rises has been well absorbed by the bond market so far, since a tax increase could build a structural budget surplus for the UK, even if there is a hit to growth. Ironically, this could make Reeves’ and Starmer’s jobs less secure, as the political chaos threatens the UK once again.
Southern Water is looking to tap the bond markets for hundreds of millions of pounds, just days after apologising for the catastrophic spill of plastic biobeads that polluted the Sussex coastline.
Bloomberg reports that Southern Water is looking to sell as much as £600m of bonds today.
They say:
The firm is sounding out investors for five-year and eight-year sterling denominated notes, both with a spread of around 230 basis points over gilts at initial price thoughts, according to a person familiar with the matter.
At the same time, the company announced a tender offer for £350 million of Sub-Class A4 notes that mature in March 2026 at a purchase price of 100.5. It will conclude on November 19, according to a statement.
On Monday, Southern Water took responsibility for a huge spill of millions of biobeads over the weekend, washing up on beaches including Camber Sands, which it says was caused by a mechanical failure at its Eastbourne sewage works.
ONS pledges “quality over quantity”, as it prioritises key statistics
Britain’s statistics body is to cut back the amount of surveys it produces, in a new “quality over quantity” push.
The Office for National Statistics is aiming to lower its output by around 10% in 2026, through “prioritisation and consolidation”, including cutting its heath statistics, and reviewing its work on crime. It will also reconsider the merits of running the Annual Population Survey.
The ONS also plans to consolidate its business surveys portfolio, but doesn’t appear to be changing the big economic data releases which are particularly important for the City.
The move is part of the ONS’s drive to improve its output, after an official review into its performance and culture found “deep-seated” issues that required radical measures to fix.
Permanent Secretary at the Office for National Statistics, Darren Tierney, says today:
“Our top priority is restoring the quality of our core statistics, and we are already enacting the key recommendations from Sir Robert Devereux’s review.
“Today’s plans take us one step further, narrowing the focus of our portfolio and reducing the number of publications so we can devote resources to our improvement work, putting quality over quantity and working closely with users to rebuild trust.”
Pound falls amid political instability fears before budget
The pound has dipped against the US dollar this morning, as traders ponder whether Keir Starmer could face a leadership challenge after the budget.
Following last night’s reports that Starmer’s most senior aides fear he could face an imminent leadership challenge, sterling has dipped by a quarter of a cent to $1.3125.
The unusual situation has shown the extent to which the Budget might be a political turning point in this parliament, and lead to a major market reaction, writes Neil Wilson, UK investor strategist at Saxo Markets.
He explains:
Markets won’t care that fiscal headroom is being built by tax hikes if the Chancellor and PM cannot survive.
Instability with the politics means fiscal instability, which means market instability re gilts – perhaps baking in a premium for an even more left-leaning, tax-and-spend government…we are heading to a fiscal showdown and political crisis that will show up in volatility in gilts and sterling – potentially a serious wobble in the pound if gilts run.
The key risk is that if Reeves and or Starmer go then their fiscal rules which have underpinned an easing in gilt yields, would be in serious doubt.
My colleague Andrew Sparrow is tracking the latest developments here:
UK bond yields rise amid ‘leadership challenge fears’
UK government borrowing costs are rising, a little, this morning as bond traders ponder the latest political turmoil in Westminster.
The cost of borrowing for a decade, and for 30 years, has risen, following reports that prime minister Keir Starmer’s allies fear he could face a leadership challenge in the wake of this month’s budget.
However, it’s not a major selloff, and borrowing costs remain lower than in the summer.
With bond prices falling, the yield (or interest rate) on 10-year UK gilts has risen by 3.8 basis points (0.038 percentage points) to 4.42%. That wipes out around half of yesterday’s fall in yields, when expectations of a UK interest rate cut in December pushed up bond prices.
The yield on 30-year bonds has risen by almost four basis points, to 5.2% – having fallen by over 7bps yesterday. These long-term borrowing costs remain lower than the 27-year high of 5.7% hit in early September.
The PM’’s allies suggest the bond markets would react badly to a change of leader, as investors would have less trust that the UK government was committed to its fiscal rules and to controlling borrowing.
Starmer’s most senior political aides warned that any attempt to oust the prime minister over tanking poll ratings would be a “reckless” and “dangerous” move that could destabilise the markets, international relationships and the Labour party, our political editor Pippa Crerar reported last night.
This morning, health secretary Wes Streeting denied wanting to oust Keir Starmer, and said rumours he could challenge the PM were “unhelpful” and “self-defeating”.
Mark Sweney
Royal Mail grew revenues and boosted the number of parcels delivered in the half year to the end of September, as the company brings on 20,000 temporary workers and 7,000 vans to deal with the annual Christmas delivery boom.
Royal Mail reported a 1.5% increase in revenue to £3.98bn for the 26 week period to 28 September, but said its growth rate would have been 3% if the exceptional period of UK general election mail last year was excluded.
The business also saw a strong increase in the number of parcels delivered over the period, up 5% year-on-year to 661m. Letter volumes were down 10% year-on-year, stripping out the general election bump in 2024.
Martin Seidenberg, group chief executive of International Distribution Services (IDS), the owner of Royal Mail, says:
“We never underestimate the important role we play at Christmas and we are hiring more people, opening temporary parcel sorting centres and putting more vans on the road to deliver for our customers again this year.”
However, the company also pointed to rising costs and macroeconomic pressures, including a £120m increase in employer National Insurance contributions (NICS), as well as increased wage costs at its UK business, a result of chancellor Rachel Reeves’s budget last year.
In September, IDS acquired a 49% stake in Collect+, which offers access to almost 8,000 pickup points which will be rebranded as Royal Mail.
On Wednesday, Royal Mail said it plans to almost double its overall number of collection points to 45,000 locations by 2030, including shops, lockers and parcel postboxes.
In September, Royal Mail reported its first annual profit for three years in its maiden results since its £3.6bn takeover by the Czech billionaire Daniel Křetínský.
The company said that it will take “many months” to roll out a new system to enable it to slash second-class deliveries, after postal regulator Ofcom gave permission in July to end second-class post on Saturdays and reduce the service to alternating weekdays from Monday to Friday.
So far the changes have been limited to a pilot running across 35 delivery offices, with a further roll out planned for next year.
FTSE 100 hits new record, putting 10,000 point mark in sight
Fans of large, round numbers are getting excited as Britain’s stock market hits a new record high at the start of trading, and is getting close to the 10,000-point mark.
The FTSE 100, which closed at a new peak last night, gained 28 points or almost 0.3%, in early trading to 9,928 points.
Energy company SSE are the top riser on the FTSE 100 this morning, up 11%, after announcing a £33bn five-year investment plan which it says will deliver attractive growth and returns.
Tabletop gaming company Games Workshop are up 4%, followed by luxury goods maker Burberry (+2.7%).
This morning’s rally takes the FTSE 100 closer to the 10,000-point mark for the first time ever, which would cap a super year for the index.
Why has the FTSE 100 done well this year? Dan Coatsworth, head of markets at AJ Bell, explains:
“Investors have faced considerable uncertainty this year and many have looked away from the US for opportunities. They’ve focused on cheaper areas of the market, of which the UK is one. We’ve seen increased interest from foreign investors looking to diversify their holdings and the FTSE 100 has also shone during the more tumultuous periods thanks to its plethora of defensive-style companies.
“When everything looks gloomy or chaotic, such as in the depths of the Liberation Day fallout earlier this year, investors often seek solace in companies whose goods and services should be in demand no matter what’s happening in the world. For example, we all need to pay insurance or water bills, or nicotine addicts will still buy cigarettes or vapes, and the FTSE 100 has plenty of these companies on offer.
“Other tailwinds for the FTSE 100 this year include the sharp rise in gold which has benefited the likes of Fresnillo and Endeavour Mining. A push for more governments to spend on defence has also improved the earnings prospects for contractors such as Babcock, another sector well-represented on the UK stock market.
“Lots of people have criticised the UK for being an old economy market, full of boring companies in the banking and natural resources sector. Yes, it lacks the excitement of go-go-growth stocks omnipresent in the US, but boring can also be beautiful when it comes to investing.
“The UK is a rich hunting ground for dividends, and it is also full of companies that have slow but steady growth and which are underappreciated engines for wealth creation.”
Japan’s finance chief issues warning over weakening yen
Japan’s government is growing anxious about its weakening currency.
The yen, which has been generally weakening since the start of October, is approaching the significant level of ¥155 to the dollar, a point where Toyko has intervened in the markets before
Japan’s finance minister Satsuki Katayama told the country’s parliament today that the government was watching the sutation closely, saying:
“We’re seeing one-sided, rapid currency moves of late.
The government is watching for any excessive and disorderly moves with a high sense of urgency.”
Katayama also warned that the negative aspects of the weak yen are becoming clearer.
The yen’s weakness may be a sign tht the “yen carry trade” is growing in popularity, as risk returns to the markets. This is the situation where investors borrow yen, and use it to buy other, higher-yielding currencies such as the US dollar.
Hopes that the US government will reopen soon have spurred risk-on moves, such as the yen carry trade, explains Stephen Innes, managing partner at SPI Asset Management:
The reopening of the U.S. government has been a bittersweet elixir for the greenback.
On one hand, risk is back on — stocks have caught a second wind, buybacks are flowing, and high-beta FX like AUD are catching the same tailwinds that power stocks. On the other hand, the same optimism that revives equity appetite also reawakens the yen’s old nemesis: carry.
When risk levels rise, the mechanical gears of the USD/JPY carry trade start spinning again — cheap yen funding chasing higher U.S. dollar returns, pushing the pair higher almost reflexively.
Taylor Wimpey blames budget uncertainty for sales slowdown
UK housebuilder Taylor Wimpey has warned that sales growth has slowed in the usually busy autumn season.
Taylor Wimpey told the City this morning that it was seeing “softer market conditions in the second half of the year”, which it blamed on current uncertainty in the housing market ahead of the November Budget.
This slowdown has pulled down Taylor Wimpey’s net private sales rate to 0.63 per outlet per week since June 30, down from 0.71 a year earlier.
Jennie Daly, chief executive of Taylor Wimpey. says:
“We have delivered a resilient performance thanks to the hard work of our teams on the ground. Market conditions remain challenging, impacted by uncertainty ahead of the upcoming UK Budget and continued affordability pressures.
We welcome the Government’s planning reforms, and we hope to see continued momentum to enable the supply of much needed new homes across the UK as focus moves to the implementation phase. However, the Government’s housing ambitions, and the significant economic and social benefits of increased housing supply can only be unlocked by effective demand, particularly for affordability constrained first time buyers.
The debate over tech stock valuations has intensified, reports Tony Sycamore, market analyst at IG, following the sharp decline in CoreWeave’s share price yesterday.
CoreWeave, the Nvidia-backed cloud computing and AI infrastructure provider, plummeted 16.31% to $88.39, driven by disappointing Q3 guidance escalating debt concerns, market rotation away from growth stocks, and supply chain challenges within Nvidia’s ecosystem.
It was joined by Nvidia, which slid 2.96% to $193.16, reflecting broader tech weakness ahead of its November 19.
Elsewhere, AMD dropped 2.65% to $237.52 and Oracle fell 1.94% to $236.15, significantly below its September peak of $345.72, a decline of about 33%.
Introduction: SoftBank shares slide after Nvidia stake sale
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Shares in Japanese tech investor SoftBank have taken a knock, after it revealed it has sold its stake in chipmaker Nvidia.
SoftBank surprised investors yesterday by revealing it sold its shares in Nvidia last month, raising $5.8bn, to fund its other investments in artificial intelligence pioneers, such as ChatGPT parent OpenAI.
And the market verdict today has been decisive. SoftBank’s shares touched a one-month low when trading opened in Tokyo – down as much as 10% at one stage – before closing down 3.5%.
Although SoftBank insisted there wasn’t a “specific” reason to sell its Nvidia shares in October, the move has raised more questions about whether the sky-high valuations given to companies in the AI sector are solid.
It also highlights the growing funding demands SoftBank faces to bankroll its bet on OpenAI and other investments.
Shares in Nvidia, whose high-speed chips are used to power AI data centres, fell 3% yesterday, amid a wider drop in tech shares.
Analysts have suggested SoftBank’s move shouldn’t cause alarm, though, as it isn’t giving up on AI.
Ipek Ozkardeskaya, senior analyst at Swissquote, explains:
It appears SoftBank is looking to boost its bets further down the AI chain — toward companies that actually use AI, like OpenAI and ABB Robotics.
For those unhappy with the circularity of current AI deals, this is good news….
Meta, for instance, signed a deal with Dutch cloud provider Nebius, which predicted rapid growth next year – and when I say rapid, it’s rapid: their sales soared by more than 300% last quarter. Their share price? It tanked 7% yesterday, along with CoreWeave, which fell 16%.
The agenda
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7am GMT: German inflation report for October
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Noon GMT: US weekly mortgage approval data
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2.15pm GMT: Treasury Committee hearing on property taxes ahead of the budget
