UK government borrowing costs crept higher on Monday after Prime Minister Keir Starmer's speech failed to reassure bond markets, with yields on long-term debt reaching levels not sustained since the late 1990s.
Bond Yields Climb
The yield on 30-year UK government bonds rose 8 basis points to 5.65%, up from 5.57% at Friday's close. This marks an increase from earlier in the morning when yields were up about 5 basis points before Starmer's address. Benchmark 10-year gilt yields also rose, climbing 6 basis points after being 4 basis points higher earlier.
Rising bond yields indicate falling bond prices, suggesting reduced appetite for UK debt and pushing up the cost of government borrowing. The move comes amid growing political uncertainty surrounding Starmer's leadership.
Political Pressure Mounts
Labour MP David Smith called on Starmer to set a timetable for his departure, stating the government needs to act faster and be more radical. Meanwhile, Labour MP Catherine West, who initially announced a challenge to Starmer over the weekend, has now backed down but urged the prime minister to set a timetable for an orderly departure by September.
Susannah Streeter, chief investment strategist at Wealth Club, commented: "Keir Starmer's address to the nation hasn't done the trick of calming bond markets. There is still a sense of jitters playing out as concerns about political instability collide with inflationary fears prompted by the ongoing conflict in the Middle East. His speech was designed to project a 'keep calm and carry on' message, but the worry is that it lacks the real substance needed to keep Labour MPs on side."
Streeter added that ten-year gilt yields have crept higher, nudging 5% once more, while longer-dated government debt remains hovering above 5.6%. These levels have not been sustained since the late 1990s.
