UK Gilt Yields Surge as Starmer Leadership Controversy Looms (GBP: GILTY, G10)

UK 30-year gilt yields jumped over six basis points to 5.39% on Thursday amid fears of a leadership change following Prime Minister Keir Starmer’s struggle to retain power due to the Lord Mandelson scandal. Investors consider Angela Rayner and Andy Burnham as potential successors, with a Left-leaning administration perceived to raise fiscal risks and spending, driving up borrowing costs. Short-term yields and the pound declined after the Bank of England signaled further interest rate cuts later this year. The 10-year gilt yield rose four basis points to 4.59%, up 0.08 percentage points since PMQ on Wednesday, reflecting heightened uncertainty about fiscal sustainability and the likelihood of a leadership transition.