1 October 2026
If you are covering the latest moves in global government bond yields and equity markets, please find below a comment from Tim Armitage, investment strategist at Quilter Cheviot:
"Volatility has re-entered the picture again for financial markets as investors get increasingly concerned about a number of risks taking root. Indeed, inflation concerns are high on the agenda once again as oil is back trading around the $100 mark, while heavy government borrowing is also spooking some. Bond yields globally have risen once again, with the UK pushing past the 6% barrier, something that is perhaps more symbolic than troubling, but nevertheless uncomfortably high in comparison to more recent norms.
"The problem markets are diagnosing is that despite rising inflation and bond yields, economic growth remains rather robust in crucial parts of the market. This is meaning investors are expecting further rate hikes and this is negatively impacting both equities and fixed income. With spending on the AI build out and infrastructure also showing no signs of slowing, there are also concerns about the funding costs. The BoE is cautioning today that the AI boom is likely to see corrections occur in markets as the winners and losers become clearer. However, Andrew Bailey has also stressed that AI has ‘great potential to strengthen growth’, so is something that should not be forgotten.
"Meanwhile in the UK, markets continue to digest Andy Burnham’s Labour conference speech and the potential for increased spending and thus more borrowing. He and his Chancellor stress the need for fiscal discipline, but without the evidence of it to date, investors will continue to demand a higher premium for government debt. Inflation is also a particular concern in the UK, with the economy exposed to higher energy costs, and no sign that the situation in the Middle East will calm enough to provide respite.
"For investors this might feel like an uncomfortable moment, with both bonds and equities struggling in recent days with the prospect of higher inflation and elevated interest rates for a considerable period of time. That said, these are shorter-term risks and economies are holding up well in the face of tightening monetary policy - indeed equities have done relatively well in the past three months.
"Despite the concerns, the AI trade continues to power markets forward, while other opportunities will present in areas of the market that are perhaps more defensive or inflation-proof. The important thing for investors to remember is that volatility is a natural feature of financial markets and to use such events to reconfirm what it is they are trying to achieve."
