UK gilt volatility rises as political turmoil curbs long-term bond bets, HSBC says

UK political instability is making investors reluctant to take long-term positions in gilts, HSBC Holdings Plc strategist Max Kettner said May 13, 2026, as speculation over Prime Minister Keir Starmer’s leadership keeps bond volatility elevated. Kettner said long-end gilt yields appear attractive but described the market as “a half-hour trade.” UK bonds were little changed May 13 after 10-year yields jumped nearly 20 basis points over the prior two sessions. The 30-year gilt yield rose 1 basis point to 5.77%, near a three-decade high. Political risk has intensified after Labour’s local election losses, with The Times reporting Health Secretary Wes Streeting told allies he could resign and trigger a leadership contest as soon as May 14, 2026. Investors are weighing whether any Starmer replacement could loosen fiscal rules and increase borrowing. Inflation concerns also remain, with oil prices above $100 a barrel amid the Strait of Hormuz closure. Markets priced 66 basis points of Bank of England rate increases this year, down from 72 basis points May 12.