FTSE 100 Falls as UK Gilt Yields Hit Highest Level Since 1998

TLDR

• The FTSE 100 fell over 1% at the start of October, extending losses from the previous session.
• UK 30-year gilt yields hit 6%, the highest level since February 1998.
• US 10-year Treasury yields climbed to 5.306%, a level not seen since 2007.
• Gold prices rose above $4,200 an ounce as investors sought safer assets.
• UK house price growth slowed to a nine-month low in September.

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British stocks dropped sharply on Thursday as rising bond yields around the world put pressure on share prices. The FTSE 100 fell more than 1% in early trading, adding to losses from the day before.

By mid morning, the index had dropped about 120 points to 10,486. The FTSE 250, which tracks more UK focused companies, also fell nearly 1%. This showed the selling was spread across the market rather than limited to large international firms.

What Is Driving the Bond Market Selloff

The main driver behind the stock declines was a global selloff in government bonds. UK 30-year gilt yields rose to 6%, the highest level since February 1998.

🚨NEW: The UK 10-year gilt yields have risen to new highs of 5.5% this morning

— GB Politics (@GBPolitcs) October 1, 2026

This followed a bond sale earlier in the week. New 10-year UK government bonds were priced to pay the highest yield for that length of debt since 1999.

The trend was not limited to Britain. US 10-year Treasury yields rose to 5.306% on Wednesday, a level last seen in 2007.

Investors pointed to worries about inflation, government deficits, and the growing supply of bonds being issued. One analyst described the bond market as facing a buyers strike, meaning fewer people wanted to purchase new debt at current prices.

Higher bond yields matter for stocks because they raise the rate used to value future company profits. They also increase borrowing costs for businesses and households.

Germany’s DAX index fell 1.33% and France’s CAC 40 lost 1.46% during the same session. The British pound also slipped, falling 0.24% against the US dollar.

Winners and Losers on the FTSE 100

Not every stock fell. Rolls-Royce gained 1.9%, while Polar Capital Technology Trust rose 1.1%.

Gold mining companies also performed well. Fresnillo and Endeavour Mining both moved higher as gold traded above $4,200 an ounce.

Among smaller companies, XPS Pensions rose 4.8% and AO World gained 4.7%. Ferrexpo and Raspberry Pi also posted gains.

On the losing side, British American Tobacco fell 3.2%. Weir dropped 2.7%, making it one of the bigger decliners on the index.

Away from stocks, the UK housing market showed signs of cooling. Nationwide, a mortgage lender, reported that annual house price growth slowed to 0.8% in September, down from 1.6% in August.

Prices fell 0.2% compared to the previous month. Nationwide said rising energy prices and expectations of higher interest rates were weighing on buyer demand.

Regional price growth also weakened across most of the country.

In commodities, Brent crude oil rose 1.4% to $99.44 a barrel. US oil gained 1.35% to $91.64.

Gold futures rose 0.25% to $4,196 an ounce, while spot gold added 0.22% to reach $4,165.95.

Investors are now watching the final UK manufacturing PMI reading for September, due later Thursday. The data could show whether the UK economy is holding steady despite tighter financial conditions. Until bond yields settle, gains in sectors like mining and defense may not be enough to offset wider pressure on UK share prices.