WeekWatch

A bond market sell-off  

Investors saw a perfect storm this week across financial markets. This culminated in US 10-year Treasury yields reaching 5.1%, a level last seen during the global financial crisis in 2007. The 30-year Treasury yield rose even further, exceeding its level in 2004. 

Government bond yields are climbing as investors demand even more compensation in response to persistent inflation pressures, a resilient economy as well as high energy prices and geopolitical uncertainty. Reinforcing higher US inflation pressures was a data release on the economic health and sentiment across the services and manufacturing sectors. This showed US business activity during September accelerated to its fastest rate in over five years. While signs of a booming economy would normally be considered as positive for markets, difficulties in sourcing suitable staff and order backlogs are adding to fears of higher pressure on selling prices and therefore inflation in the months to come. This strength in the economy also suggests it is strong enough to absorb another rate hike. It also feeds into the higher for longer narrative regarding interest rates, pushing bond prices, shares and the gold price lower.  

A US diesel export ban – a cure worse than the disease

After spending a period below $100 a barrel earlier in the week, the price of Brent crude oil spiked to $105, rising 17% over the month. Geopolitical tensions across the Middle East remain elevated, and reports that President Trump has been considering a curb or ban on US diesel exports also weighed on sentiment. 

US diesel prices are almost 80% higher than last year but any move to restrict US diesel exports will have little effect on prices at the pump.  Much of the price surge reflects supply disruptions caused by war-related damage to refining infrastructure in Russia, one of the world’s largest diesel producers. 

European crossroads 

European economies have been under near-continuous pressure since the invasion of Ukraine in 2022. These shocks materialised through energy markets, pushing inflation higher, while the export-led growth model has faltered. Some traditional areas of strength, such as autos, luxury goods and pharmaceuticals, have weakened. While car giant VW’s recent update revealed that its operating profit margin will be only 1% this year, compared to a previous forecast of 4%, and 8% only a few years ago, China is gaining a record market share of new car sales across Europe, boosted by demand for hybrid vehicles. 

Carlota Estragues Lopez, SJP’s Equity Strategist, suggests that some of this regional pessimism may be overdone. She says: “Europe is trading at a price-earnings ratio of around 14x, compared to 21x for global markets.” Greg Venizelos, SJP’s Fixed Income Strategist, agreed that it might not take much for the region’s valuations to benefit. He drew attention to the latest data release for July on the region’s economic activity and sentiment released this week, registering a five-month high.    

Protection gap affects over half of consumers

More than half of consumers don’t have pure protection policies in place, according to a report from the Financial Conduct Authority (FCA).

The regulator found that 58% of consumers hold neither life insurance, critical illness or income protection.¹

While some consumers may have decided that protection insurance is not appropriate for them, the report found that 59% of people without cover have never considered if they need it.

The protection gap measures the difference between the level of cover someone has and the level they require. This gap is driven by a range of factors, including low product awareness, limited understanding, friction in the consumer journey and underwriting complexity.

To make protection more accessible, the FCA plans to support providers in raising awareness of protection products. It will also encourage innovation, support initiatives to reduce delays in the consumer journey and help firms communicate the benefits of ongoing protection cover.

HMRC warns of unclaimed child trust funds

HM Revenue & Customs (HMRC) is urging owners of matured child trust funds to claim their savings.

Around 827,000 accounts, worth on average £2,310 each, remain unclaimed, according to HMRC.²

Child trust funds (known as CTFs) were long-term savings accounts set up for children born between September 2002 and January 2011. They were later replaced by junior individual savings accounts (ISAs).

Many CTFs received an initial government contribution of at least £250. Where parents or guardians did not open an account, one was opened on the child’s behalf. As a result, some young adults may be unaware they may have CTF-related savings.

When a CTF holder reaches age 18, they can choose to withdraw the money, leave it invested or transfer it elsewhere.

Anyone unable to locate their account can use the government’s locator tool.

¹Financial Conduct Authority, Market study MS24/1.5 – September 2026
²UK Government, press release – September 2026