UK long-term borrowing costs reached their highest level in nearly 30 years, driven by concerns over potential shifts in Labour’s leadership. The yield on 30-year government bonds spiked by 11 basis points to 5.794% on Tuesday morning, marking the highest rate since May 1998. This surge was fueled by investor apprehensions regarding possible changes to Labour’s tax and spending strategies under new leadership. However, the rates eased slightly later in the day after a display of solidarity for Keir Starmer from his cabinet ministers.
Prime Minister Keir Starmer addressed a cabinet meeting on Tuesday morning, affirming that he would not resign and clarifying that no leadership challenge process had been initiated. This reassurance came amidst the backdrop of Miatta Fahnbulleh’s resignation, the first minister to step down following Labour’s significant losses in recent local and devolved elections. Fahnbulleh’s departure included a call for Starmer to resign.
In the meeting, Starmer emphasized, “The Labour party has a process for challenging a leader and that has not been triggered. The country expects us to get on with governing. That is what I am doing and what we must do as a cabinet.” His statements aimed to steady concerns and reinforce his commitment to leading the government effectively despite the recent electoral setbacks.
Following the cabinet gathering, key ministers such as Peter Kyle, the Business Secretary, Liz Kendall, the Technology Secretary, and Steve Reed, the Housing Secretary, expressed their support for Starmer to the media. Their public backing appeared to help calm the financial markets. Consequently, the benchmark 10-year yield on UK government bonds decreased to below 5.1%, after reaching 5.13% earlier, while the 30-year yield settled at 5.76%, down from a new 28-year peak of 5.81%.