Oil above $100 tips the bond market past its limits

The sell-off resumes

Thursday belonged to the bond market, and not in a good way for anyone holding the paper. The Guardian reported that the global bond sell-off resumed as surging oil prices stoked fears about inflation and about the cost of government borrowing. The Wall Street Journal put the US 10-year Treasury yield on the cusp of 5%, describing the decline in prices as unrelenting.

Crude did the leading. City A.M.'s live coverage had oil marching towards $106 as Donald Trump threatened a long war, with the FTSE 100 diving in response. The Journal's close-of-day account recorded US stocks falling as oil topped $100 and yields hit multiyear highs.

In Britain, This is Money reported UK borrowing costs at a 28-year high in the rout, with markets simultaneously ramping up bets on a Bank of England rate rise as oil and gas prices climbed. The two moves are not separable: the same fuel bill that argues for tighter policy also raises the price at which governments can fund themselves.

The US Treasury's attempt to steady the long end did not take. A buyback operation ran on Thursday and bonds sold off anyway, according to the Journal, which had already written that Scott Bessent's latest buyback move left investors wanting more. One counterpoint came from Hong Kong: Marsh Investment told the South China Morning Post that the record gap between Chinese and US bond yields is unlikely to trigger capital flight.

Central banks, and this morning's number

The European Central Bank raised interest rates to 2.5% on Thursday and warned that the war with Iran is fuelling inflation, the Guardian reported. That is a rate rise delivered with an explicit energy justification attached, which is a different thing from a rate rise delivered on wage data.

The BBC asked the obvious question — whether interest rates are on the way up again — and the market has begun answering it. CNBC reported that the likelihood of a Federal Reserve rate rise at next week's meeting just got a lot higher.

Which puts unusual weight on the August consumer price index, due this morning. CNBC's preview called the report even more important than usual, and set out what economists expect. The Journal, for its part, spent part of Thursday asking what bond yields are 'saying' about stocks — a question that tends to be posed when the answer is uncomfortable.

Politics has not stayed out of it. Euronews reported that the Portuguese economist Ricardo Reis was dropped by the IMF after criticising Mr Trump's tariffs. The Journal separately examined a trillion-dollar 'Trump dividend' and the hurdles it faces.

Company news, largely unrelated

Higher yields reached the credit market quickly. Sky News reported that South East Water abandoned a bond issue as investors fled the sector, an outcome that speaks to the borrower as much as to the rate backdrop.

HSBC shares slumped after news that the bank's finance chief is set to exit, City A.M. reported. Apple shares slipped as well, with iPhone price rises stealing the thunder of the new foldable. At Ryanair's meeting, 39% of shareholders voted against Michael O'Leary's £130m payday — a bloody nose, in This is Money's phrasing, though not a defeat.

Deals and listings carried on. Accel-KKR agreed to buy an AIM-quoted construction software firm for £208m. Brooks Automation filed confidentially for an initial public offering. In Hong Kong, the market watchdog suspended shares in Cloudbreak Pharma and opened an investigation into what it called a rigged flotation, while Yuen Kee Food entered the final stage of its own listing after HKEX approval, according to sources cited by the South China Morning Post. Regulatory uncertainty is clouding the IPO plan of the Chinese robot firm Galaxea AI, the Journal reported, and Anthropic used the week to promote its 'strongest safeguards' as an AI warning dogged its listing push.

Elsewhere: Sun Hung Kai Properties posted a 4.6% rise in profit amid Hong Kong's property recovery; UBS pulled fund sales from a Chinese wealth platform, citing stiff competition; and AIG acquired a stake in Salford City Lionesses, expanding its partnership with Gary Neville's club.