The infoshot to help kick-start your week
Bond yields reach new highs as Reeves survives reshuffle
The yield on 30-year UK government bonds hit its highest rate in 27 years reaching 5.75% on Wednesday. The wider global bond sell-off has seen the rate rise steadily over the last 12 months. Yields dropped down to 5.57% later in the week following increased odds of a US rate cut. We weren’t alone in seeing borrowing costs rise, with yields on 30-year German, French and Dutch bonds rising to their highest level since 2011.
High yields will add to the pressure on Rachel Reeves’ upcoming budget. She’ll have less fiscal headroom available and will have to consider tax rises, or further spending cuts, if she wants to achieve her goal to have UK debt falling in five years’ time. Another side effect of higher yields can be found in the annuity market where the average rate for a 65-year-old, with standard terms and no guarantees, is currently hovering around 7.8%. That’s roughly 10% higher than this time last year.
Reeves stayed in her role as Chancellor when a major reshuffle was triggered by Angela Raynor’s resignation. Dubbed “Phase 2”, half of Kier Starmer’s cabinet ended up switching roles by close of play Friday.
Job numbers raise concerns and increase the chances of a bigger rate reduction
The odds of a US rate cut increased on Friday when the latest US jobs numbers raised concerns about the state of the US economy.
Employers added just 22,000 jobs last month, far fewer than expected. The revised estimate for June actually showed the US lost jobs that month, marking the first decline since 2020 and the covid pandemic. The Federal Government cut 15,000 positions last month, and the manufacturing sector reported its fourth straight month of job losses.
The impact of Trump’s tariffs and immigration policies, coupled with cuts to government spending and the firing thousands of government workers through DOGE, are inevitably having an impact on the numbers. Analysts estimate the US needs to create 50,000 jobs each month (far less than it did before Trump’s immigration crackdown), to keep up with population growth.
During the last round of bad job numbers, Trump blamed the Commissioner of the Bureau of Labour Statistics (BLS), Erika McEntarfer, claiming she “RIGGED” the figures to “make the Republicans, and ME, look bad”. With her fired, this time around he’s put the blame on the doorstep of Fed Chair, Jerome Powell, saying, “Jerome ‘Too Late’ Powell should have lowered rates long ago. As usual, he’s too late!”
Markets have now started pricing in a bigger half a percentage point rate reduction this month and further easing throughout 2025.
Musk given huge pay incentive to turn Tesla around
According to the European Automobile Manufacturers Association (ACEA), new Tesla car registrations in Europe totalled just 8,837, 40% down year-year. Sales have now plunged for seven months in a row as Musk’s company struggles with damage to the brand’s reputation and intense competition. In contrast, European registrations for Chinese rival BYD surged to 13,503, 225% up year-on-year.
If Musk can turn Tesla back around and hit the targets set in his new pay package, he could become the world’s first trillionaire. Musk will receive new shares that will push his stake in the company past 25% if he can increase the value of Tesla from around $1tn now to $8.5tn in 2035. The $8.5tn valuation target is more than double the current value of the world’s most valuable company, Nvidia. If he fails to double Tesla’s valuation over the 10-year period, he’ll receive no pay award.
Coming Up:
- ECB Interest Rate Decision, Thursday 11 September at 13:15pm
- US initial jobless claims, Thursday 11 September 2025 at 13:30pm
- UK GDP, Friday 12 September 2025 at 07:00am
Notice:
For regulated financial advisers and investment professionals only, Copia does not provide financial advice, and the contents of this document should not be taken as such. The performance of each asset class is represented by certain Exchange Traded Funds available to UK investors and expressed in GBP terms selected by Copia Capital Management to represent that asset class, as reported at previous Thursday 4:30pm UK close. Reference to a particular asset class does not represent a recommendation to seek exposure to that asset class. This information is included for comparison purposes for the period stated but is not an indicator of potential maximum loss for other periods or in the future.
