Starmer Calms Bond Market as 30-Year Gilt Hits 5.81%
UK bond market borrowing costs hit a 28-year high on the morning of the article, with the 30-year gilt yield reaching 5.81% before easing back after Keir Starmer told the cabinet, "I am not resigning." The move briefly pushed long-term government borrowing costs to levels last seen in 1998.
By around noon, the 30-year yield was 5.76%, up 9 basis points (hundredths of a percent), while the 10-year bond yield was just below 5.1% after earlier touching 5.13%. For anyone funding or pricing UK duration risk, that meant the long end of the gilt market was still marked materially higher even after the sharpest political pressure eased.
Starmer Backing From Cabinet
Several cabinet ministers later told reporters they were supporting Starmer, including Peter Kyle, Liz Kendall and Steve Reed. That public backing followed the cabinet meeting and helped pull yields off the day’s peak, even as the market had already priced in the political strain around Labour’s leadership.
A City source at a UK investment bank called the turmoil "an unwelcome distraction" and said traders seemed "sanguine" about it. The same source said the instability was not unique to the UK and was increasingly used across Europe, which helps explain why the gilt move did not turn into a one-way break.
Gilt Market Pricing
The 30-year move was the clearest signal: a rise to 5.81% before slipping to 5.76% shows how quickly long-dated borrowing costs can move when leadership risk enters the frame. The 10-year yield’s climb to 5.13% showed the pressure was not isolated to the ultra-long end.
Kit Juckes predicted further gilt and sterling weakness in the coming days, keeping pressure on investors who are exposed to UK rates and the currency at the same time. Greater Manchester Mayor Andy Burnham was the bookmakers’ favourite to replace Starmer, but confidence that he could win a by-election had been damaged by Labour’s poor local election performance, while Angela Rayner remained in Parliament without the same breadth of support.
Labour Policy Price Tag
UK 2026 consensus GDP growth forecasts had already fallen from 1.1% at Christmas to 0.8%, and the market backdrop has also been shaped by expectations of higher spending and higher taxes under future Labour policy, including taxes on wealth and housing. If Starmer’s authority keeps weakening, the bond market is likely to keep treating the leadership question as part of the pricing on UK debt, not as a side issue.
