UK pays highest yield since 1999 at 10-year bond auction
Newsflash: Britain’s government has paid the highest interest rate since 1999 on a sale of 10-year bonds this morning.
An £4.25bn auction of a new UK gilt maturing in 2036 has just concluded, with bond investors successfully demanding an average yield of 5.383% when bidding to buy the debt.
That’s the highest yield, or interest rate, since September 1999, Reuters reports.
The auction, held by the Debt Management Office, received bids for more than three times as much debt as was for sale, showing investors were still keen to buy UK debt, but at a price….
This results follows months of turmoil in the government bond markets, driven by inflation fears, which has driven up the yield on debt traded between bond investors.
Today’s auction highlights that those moves have real implications for the government, as higher bond yields push up the cost of servicing the national debt.
Earlier this month, the UK government was forced to pay the highest interest rate for a 30-year bond since 1998.
These costs have obvious implications for the government’s spending plans, ahead of Andy Burnham’s speech to Labour’s party conference at 2pm today….
Key events
Closing post:
Time. to wrap up….
The UK government has paid the highest yield since 1999 at an auction of 10-year debt today.
Investors forced the Debt Management Office to accept an average yield of 5.383% on a sale of debt maturing in 2036.
Bloomberg reports:
“The auction was on the weaker side, which adds to the narrative that investors continue to be reluctant to add duration here despite attractive yield levels,” said Evelyne Gomez-Liechti, a multi-asset strategist at Mizuho International Plc.
Demand for UK mortgages slumped to a 32-month low in August as buyers were deterred by rising costs linked to the war in Iran.
Just 54,918 mortgages for new home purchases were approved in August, the Bank of England reported on Tuesday, the lowest monthly total since December 2023.
The data, which is seasonally adjusted, shows the impact of the rise in UK mortgage rates since outbreak of the war in Iran in late February began pushing up the price of oil, and sinking hopes of interest rate cuts.
AstraZeneca has made a $2bn strategic equity investment in Summit Therapeutics, to develop and test anti-cancer drugs.
In the AI world, Anthropic is telling investors that advanced AI could pose “catastrophic or existential risks to humanity”, according to reports, as it prepares for a potential $2tn (£1.5tn) flotation….
…as rival OpenAI scraps the release of a next-generation AI model after researchers raised safety concerns during internal testing.
The boss of Britain’s biggest insurer has said that homes being built now in England could become uninsurable in the future because they are sited in flood-risk areas.
US consumer confidence falls to 12-year low
Eek. US consumer confidence has fallen to the lowest level since 2014.
Pessimism is rising about the economy and the US jobs market, according to the Conference Board’s gauge of confidence – which has decreased by 6.7 points to 81.9 points.
Dana Peterson, chief economist at the Conference Board, says:
“Consumers’ write-in responses regarding factors affecting the economy were mostly pessimistic in September.
References to prices, the high cost of goods and services, and oil and gas prices in particular, rose to new heights.”
Cruise operator Carnival has raised its full year outlook after seeing demand for future sailings hits the highest-level ever during the current quarter.
The Miami-based cruise operator attributed its improved outlook to a third-quarter record $7.6bn in bookings, beating a prior-year record by $500m
US job vacancies
Over in the US, the number of job vacancies available has dropped.
There were 7.079m job openings available in August, according to the latest JOLTS survey, down from 7.335m in July.
Firms did take on more workers, though. Hires rose to 5.192m, up from 5.146m in July, while the number of Americans quitting their jobs was little changed at 3.066m.
That didn’t take long! Shares in UK utility companies shares have bounced back, with Pennon, United Utilities and Severn Trent now all slightly higher on the day.
Angeline Ong, senior technical analyst at IG, reckons Andy Burnham’s shake-up of the water industry could have wider implications…
Burnham signalled public ownership for water and utilities at today’s Labour conference. Nationalisation without clear compensation terms would be a negative read for United Utilities, Severn Trent and Pennon. It could also lead to a wider read-through of unmitigated risk for other regulated utilities (e.g. National Grid), even though they’re not directly named.
Watch now to see if the market prices in a UK regulatory-risk premium across all regulated utilities until compensation terms are clarified, since National Grid and Pennon could see their valuations marked down too, purely by association, even though he didn’t name them directly, and the real catalyst is whether this survives as costed Labour policy or gets walked back before conference ends.
Water company shares dip as Burnham announces end to ban on public ownership
Shares in UK water companies are dipping on the stock market, after UK prime minister Andy Burnham pledged to repeal a ban on the public ownership of water companies.
Speaking at the Labour Party conference in Liverpool today, Burnham cites the water industry as a symbol of what has gone wrong with Britain.
Burnham says the water companies have “siphoned out easy money while the public picked up the bill for the sewage in our seas.”
He goes on to promise tougher regulation, saying:
It stinks. I will not allow it.
Today I can confirm Angela Eagle will present a strengthened water bill to parliament. The centrepiece of that bill will be this – the repeal of Margaret Thatcher’s ideological [ban on the public ownership of water] …
It will strengthen public control. Mayors will have new powers to hold water, companies to account …
It will close loopholes used to pay excessive bonuses. Where private companies serve the public interests, we will support them. But the consequences will be clear for those who do not, including taking back control or public ownership.
Shares in Severn Trent are down 0.8%, with Pennon Group down 0.6%.
[Pennon own South West Water, who have just been fined for sewage failings].
Our Politics Liveblog has full details of Burnham’s speech:
Elsewhere in the financial markets, the oil price is dropping.
Brent crude has dropped by 2.1% to around $103 a barrel, helped by signs that exports from the Middle East may be picking up.
Crude exports from major Middle Eastern producers climbed to 12.8 million barrels a day in September, the highest since February, preliminary figures from data provider Kpler showed on Monday.
Reports that Saudi Arabia has restored about half the capacity of its East-West pipeline, which was hit by drone attacks this month, also pushed oil down.
This morning’s UK 10-year bond auction saw relatively weak demand, Bloomberg reports:
Tuesday’s offering received bids 3.34 times the amount on offer, lower than last month’s sale which was oversubscribed more than 3.6 times.
The auction tail — the difference between the yield at the weighted average accepted price and the lowest accepted price — also pointed to weaker appetite. The tail on Tuesday was 0.5 basis point, compared with 0.1 basis point in August.
South West Water fined £7.8m for sewage spills in Devon and Cornwall
Newsflash: South West Water has been fined more than £7.8m for committing environmental offences across Devon and Cornwall over a six-year period.
It is the largest ever fine imposed for environmental offences in the region, according to the Environment Agency.
And it follows an unpleasant wave of sewage spills, totalling many hundred in total, which took place over six years at popular bathing spots in the region.
The offences took place between January 2015 and July 2021 in locations across Cornwall and Devon: Bodmin, Harlyn, Playing Place, Polperro and Plymouth, and will be stomach-churning for anyone who holidayed in the regions at that time.
For example:
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On 24 August 2019, “untreated sewage gushed through the harbour wall on a bank holiday weekend” at Polperro Harbour.
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On 231 occasions between January 2016 and July 2021, untreated sewage was discharged onto Harlyn beach, a location popular with locals and tourists.
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At SWW’s sewage works near Bodmin, there were 336 illegal spills in the seven years to March 2020.
Clarissa Newell, area environment manager at the Environment Agency, says:
Hundreds of pollution incidents occurred at some of the most scenic locations in Cornwall and Devon, including bathing waters, a designated Special Area of Conservation and a priority habitat.
South West Water have promised the public that one pollution is too many, and our officers are out every day holding them to account.
We hope this record fine will influence a new approach for South West Water, where protecting the environment takes priority in spending decisions.
Julia Kollewe
Summit Therapeutics, the Miami-based cancer drug developer that AstraZeneca is investing $2bn in (see earlier post), was co-founded in 2003 by the UK geneticist and Oxford University emeritus professor, Kay Davies.
Davies is a respected figure in human genetics, known for her research into the molecular basis of neuromuscular and neurological disease.
She told the Guardian that she no longer has any dealings with Summit and sold her shares a few years ago.
Summit is run by co-CEOs Bob Duggan, an American entrepreneur, and Dr Maky Zanganeh, both billionaires who married in December 2024, after their previous success building and selling Californian firm Pharmacyclics for $21bn to AbbVie in 2015. Duggan owns a majority stake of more than 70% in Summit.
The pair are passionate about cancer fighting drugs partly because of their own personal experience. Zanganeh survived breast cancer, and Duggan’s son died from brain cancer, according to Forbes.
Born in Iran, Zanganeh fled to Germany with her family after the 1979 Islamic Revolution, and did a degree in dentistry and an MBA. She ended up working for a US surgical robot firm where she met Duggan, a prominent Scientologist and serial entrepreneur, according to Forbes, who described the couple as “biotech stars”.
Labour to allow mayors to borrow against tourist tax takings
Richard Partington
Labour plans to allow regional mayors to borrow against revenues they generate from local tourist taxes in their areas, as part of sweeping new devolution powers expected to be announced before Christmas, the business secretary has said.
Jonathan Reynolds said the government would announce the details of a new “rewiring the state” white paper before Christmas, my colleague Richard Partington writes.
As part of it, he said directly-elected mayors would be given powers to borrow against the revenues of tourist taxes to fund priorities in their local areas.
Reynolds says:
“Fiscal devolution in terms of taxation, like the visitor levy, that’s how people will use it. They will have a revenue stream they can borrow against.”
Reynolds also said the government will take into account the “significant ask” placed on businesses from tax rises at next month’s budget, as he said his department was pushing for action to cut energy costs.
Speaking in conversation with the boss of the British Chambers of Commerce at Labour’s annual conference in Liverpool, the business secretary said he had made “offensive and defensive asks” of the chancellor, John Healey, before next month’s budget.
He added:
“There’s been a significant ask of business, the prime minister used these words, in previous budgets. I think that has to be taken into consideration.”