Keir Starmer Fails To Calm Bond Markets As UK Gilt Yields Rise

UK gilt yields crept higher after Keir Starmer’s speech failed to dispel investor “jitters” over political instability and fears of rising inflation, with the yield on 10-year UK government bonds rising eight basis points to 5% on Monday.

The 30-year gilt yield rose 9.3 basis points to 5.67%, edging closer to the 28-year high of 5.78% last week as uncertainty about Starmer’s future as prime minister intensified.

Al Jazeera

In his speech, Starmer said he would fight any leadership challenge and would not walk away from his responsibilities after Labour’s drubbing in local elections in England and parliamentary contests in Scotland and Wales last week.

Susannah Streeter, chief investment strategist at Wealth Club, said the speech had not “done the trick of calming bond markets,” as concerns about political instability collided with inflationary fears tied to the ongoing conflict in the Middle East.

The Guardian also tied the market move to leadership speculation, saying “Britain’s borrowing costs rise” as investors reacted to intensifying speculation over Starmer’s future.

As leadership threats mounted, backbench MP Catherine West pressed ahead with efforts to force Starmer to quit, beginning to collect signatures from Labour MPs demanding he commit to stepping aside by September after Labour’s disappointing local election performance.

West told the BBC 5Live that if Starmer’s speech “grabs the nation” she would drop her push to challenge him, while the BBC reported that the north London MP threatened to begin canvassing support if he left her “dissatisfied” with his plan.

AP News

The BBC said Monday’s address would be the most important speech of Starmer’s premiership so far, with the prime minister expected to say “To meet the challenges that our country faces incremental change won't cut it.”

In parallel, Angela Rayner stopped short of launching a leadership bid herself but warned Labour faced its “last chance” to repair its relationship with voters facing “squeezed living standards,” and she backed Andy Burnham to return to Westminster.

The i Paper described Labour’s rulebook hurdle for potential leadership hopefuls, saying contenders required to win the endorsement of 81 Labour MPs, a fifth of the current total, to trigger a contest.

Financial markets also linked the borrowing-cost pressure to international developments in the Iran war, with The Guardian reporting that investors believed the UK was more exposed than many other developed countries to rising inflation from higher energy prices.

Ruth Gregory, deputy chief UK economist at Capital Economics, said: “Most of the recent rise in gilt yields is due to the jump in energy prices, rather than a potential change in prime minister.”

The Times reported that Brent crude rose 3 per cent to $104.33 after President Trump rejected Iran’s response to his peace proposal, and it said the continued stalemate left the Strait of Hormuz “largely closed.”

The Times also quoted Trump on Truth Social writing: “I don’t like it TOTALLY UNACCEPTABLE,” and it described how higher oil prices lifted the UK’s FTSE 100 while the crisis weighed on President Trump’s visit to Beijing.

Against that backdrop, CNBC said Starmer vowed to “face up to the big challenges” in a make-or-break speech on Monday, while also noting that speculation over a change of prime minister was putting increasing pressure on already-high government borrowing costs.