Whilst not of international significance it matters deeply to us as Sterling investors (and taxpayers) and the manner of its execution has been painful. Budget ‘Purdah’ has been abandoned and flying kites of its content to test the water has been a source of volatility. The trailing of manifesto breaking income tax rises was replaced by a retraction (lamely and latterly justified by a mooted upgrade to prospective growth by the OBR) and this has continued to make sure the long end of the Gilt curve is a volatile place. Fiscal realities along with a record ex Covid Public Borrowing Requirement (a mere £10Bn more than expected ytd) mean that we have seen a range for the 30 yr Gilt from 5.5% to 5.16 %, then back to 5.45%, a move of 5% in capital terms. The OBR has, in fact, just downgraded growth for 2026 and every year of this parliament.

A divided FOMC means that we still have an uncertain Fed outlook. However recent Fed officials comment has prompted rising expectations for a December cut. This appeared to outweigh tech valuation concerns although markets seem to be more fixated on NVDA earnings than delayed non farm payrolls, thankfully the US government has reopened. The AI tech story is spreading into other asset classes as expansion using equity funding is replaced by debt funding. 2025 has seen big tech issuing record amounts of debt, $240Bn so far, and one forecast has expansion in AI and datacentres needing $1.5Trillion by 2028. Alphabet ($25Bn), Meta ($30Bn) and Oracle ($18Bn) issues have all been snapped up with Meta gaining a book of $125Bn. Issuing that kind of debt into previously lightly geared balance sheets does have consequences and formerly conservative ORCL has seen its CDS gap out to 118, levels not seen since the wides of 2022, and now three times that of US Treasuries (they used to be on a par).

The ECB remains in a holding pattern as EU growth comes in better than expected. Core inflation remains sticky and with more robust growth it looks as though there might be no change to the 2% deposit rate throughout 2026.

Away from tech, primary issuance continues to break records in USD and EUR as demand remains strong. Post summer Sterling issuance has also been healthy and we have seen some pre-funding for 2026. Credit spreads have remained rangebound to a touch wider, but are well supported by liquidity.

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.