UK borrowing costs surge as Starmer leadership crisis rattles bond markets

{"text":[[{"start":10.85,"text":"The UK’s long-term borrowing costs have hit their highest level since 1998 as widening cracks in the premiership of Sir Keir Starmer fuel a bond sell-off that is piling pressure on the public finances."}],[{"start":23.2,"text":"Thirty-year gilt yields reached as high as 5.81 per cent on Tuesday after rising 0.14 percentage points, topping the level reached last week in anticipation of a disastrous set of local election results for the ruling Labour Party, before falling back to 5.77 per cent. "}],[{"start":42.15,"text":"Benchmark 10-year gilt yields hit their highest level since 2008, rising 0.13 percentage points to 5.13 per cent, as the price of the debt fell. The yield later fell back to 5.1 per cent."}],[{"start":58.05,"text":"A second consecutive day of selling was sparked by pressure from cabinet ministers on Starmer to consider his position, with the prime minister suffering a string of resignations by parliamentary private secretaries and by the first ministers to quit his government."}],[{"start":null,"text":""}],[{"start":73,"text":"“A drawn-out leadership process will be very off-putting to foreign investors — buying now is stepping on to a rollercoaster,” said Gordon Shannon, a fund manager at TwentyFour Asset Management."}],[{"start":84.9,"text":"Pointing to the rise in borrowing costs, housing secretary Steve Reed said on X that “the instability has consequences for people’s lives”, as he called for MPs to unite behind the prime minister."}],[{"start":98.5,"text":"The pound was down 0.6 per cent against the dollar at $1.353 and was 0.2 per cent lower against the euro at €1.153."}],[{"start":112,"text":"“The latest developments increasingly look like the end of the road for Keir Starmer as prime minister,” said Lee Hardman, senior currency analyst at MUFG. “A leadership contest . . . will add to political uncertainty in the near term which is negative for the pound and gilts.”"}],[{"start":127.85,"text":"The political instability has piled on top of the economic fallout from the Iran war, which has driven up inflation and particularly hit gilts."}],[{"start":136.6,"text":"A rise in oil prices has led traders to expect three quarter-point interest rate rises by the Bank of England this year to contain an energy-driven burst of inflation. "}],[{"start":146.79999999999998,"text":"Other European bonds also fell on Tuesday as oil prices rose. Thirty-year bond yields for French and Italian debt were up 0.06 percentage points and 0.07 percentage points respectively. "}],[{"start":161.54999999999998,"text":"Any departure from the Labour government’s fiscal rules “would allow [it] to borrow more, which is why it is hurting the long end”, said Cathal Kennedy, senior UK economist at RBC Capital Markets."}],[{"start":null,"text":""}],[{"start":174.35,"text":"These concerns were underlined by a paper published on Tuesday by the soft-left Tribune Group of Labour MPs, arguing that Britain’s debt targets should shift to a longer 10-year horizon."}],[{"start":185.45,"text":"Investors are increasingly sizing up the various candidates to replace Starmer as prime minister. Some argue that a more drawn-out process that allows Greater Manchester mayor Andy Burnham to get in a position to compete would be negative for the gilt market, rather than a speedier contest that favours centrist Wes Streeting, another likely challenger."}],[{"start":204.64999999999998,"text":"“If it’s anything other than Streeting — if it’s [Angela] Rayner or Burnham — then I think the gilt market is likely to take fright,” said Neil Birrell, chief investment officer at Premier Miton."}],[{"start":226.04999999999995,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778629047_7052.mp3"}