Is the economy simply too strong for the bond market's liking?
A high street bakery, an American chipmaker and the US Treasury market all told the same story yesterday: demand is holding up, investment is accelerating, and neither is particularly helpful for inflation.
Greggs: the British consumer is bending, not breaking
Greggs' like-for-like sales rose 3.4% in Q3, up from 2.1% in H1. Total sales rose 7.7%, helped by new shops, and the company now expects a "modestly improved outcome" for 2026, having previously guided to profits broadly flat on last year.
The shares closed up 8%.
The pick-up came from iced drinks like matcha (🤢), a relaunched salads range (😭) and better weather (😍). That's a business trying to adapt to changing eating habits and the unpredictable British weather.
Back in January, CEO Roisin Currie said customers were demanding more protein and smaller portions, "particularly if they are using any of the GLP-1 drugs". In February, Jefferies cut the stock to hold with a 1,610p target, estimating 4m UK users of weight-loss jabs. The shares are now nearly 25% above that.
That's a lesson in how a narrative can get ahead of the share price. "Weight-loss jabs will kill the sausage roll" was a great story. More than 10% of Greggs' shares were sold short going into the update. The numbers turned and guidance reflected cautious optimism: people are still buying, just not always the same things.
There are two warnings, though.
Greggs is shutting four factories and moving to more automated sites, putting around 740 jobs at risk to save approximately £20m a year from 2028. It also flagged "signs of greater inflationary pressures in 2027". Only about half of next year's energy is hedged and it warned that higher energy and diesel prices could feed through into the cost of fertiliser, crops and protein.
So, while the consumer is currently coping, next year's costs are the worry.
Micron: the AI boom doesn't look like it is slowing down
Micron reported approximately $54bn of revenue for the quarter, up more than four times year-on-year and well ahead of forecasts of around $51bn. Data-centre revenue rose more than elevenfold to $18bn and gross margins hit 87%.
It guided to $61.5bn next quarter, against analysts' expectations of around $57bn.
The forward book is even more striking. Contracted future revenue is now around $150bn, up from roughly $100bn last quarter, while customers have put down billions in cash deposits to secure supply.
Micron says most of next year's high-bandwidth memory is already sold and expects supply to be even tighter in 2027 and 2028.
Which raises the question hanging over the AI trade: is memory still a cyclical business?
Historically, it always has been. In the 2022–23 downturn, memory makers lost billions and stopped building capacity, which is a big reason supply is so tight now. New fabs take around three years to build, so this squeeze should last a while.
But China's CXMT and YMTC are expanding fast, and if the big data-centre builds stall, today's shortage becomes tomorrow's glut.
Those long-term contracts either break the boom-bust cycle or push it further out.
The shares barely moved in after-hours trading. Why? Matt Bryson of Wedbush explained on CNBC: guidance of just over $38 a share in earnings beat the published consensus of around $35, but landed right in the middle of the $36–40 that the buy side had been whispering.
In other words, the real bar wasn't the one in the spreadsheets. A company quadruples its revenue and the market starts debating the second decimal place.
That tells you how much is already priced in for a stock that has more than tripled this year and joined the $1tn club in May.
The bigger point is that the AI build-out isn't slowing. Big Tech is set to spend more than $730bn on AI infrastructure this year, and memory prices are rising with it.
That's brilliant for Micron. But it's also inflationary.
The bond market: oil isn't the story any more
Brent fell below $100 as hopes for US-Iran talks took some of the war premium out. On the old script, that should have been good news for bonds.
It wasn't.
The US 10-year yield rose to around 5.3%, and the 30-year to around 5.6%, close to its highest level since 2002.
The bond market is starting to look beyond oil. A resilient consumer, an extraordinary AI capex cycle and businesses warning about higher costs in 2027 all point towards stickier inflation.
Lower oil helps. But it doesn't solve that problem.
The Comms Read
Greggs announced a profit upgrade and 740 job cuts on the same morning.
That gave its critics an easy line. The union asked: if the business is doing so well, why cut jobs?
The press kept it simple too. Greggs talked about "efficiency". The Telegraph framed it as "replacing humans with robots". And in Kelso, where one of the factories has operated since 1968, local politicians quickly turned it into a story about lost jobs in a small town.
The problem isn't necessarily the decision. The economics may make perfect sense: automate production, reduce costs and protect margins against higher input prices.
The problem is the sequencing.
We've seen this before. In late 2021, former BP boss Bernard Looney described the company as a "cash machine" just as household energy bills were beginning to soar. The comment was aimed at shareholders. Everyone else heard something different.
The lesson for corporate communications is simple: don't assume the audience will consume the good news and bad news separately. They won't. If the headline is "profits up, jobs down", the profit upgrade may end up explaining the job cuts rather than celebrating the performance.
The economy is holding up. The question is whether the bond market can keep believing that is good news.
Time will tell. GLA & DYOR.
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