Bond yields rise when prices fall.<\/p>\n
Today\u2019s bond sell-off comes after a jump in the oil price yesterday, as tensions rose in the Middle East as Donald Trump sent warships to break Iran\u2019s strait of Hormuz blockade.<\/p>\n
The failure to reopen the strait of Hormuz has driven oil prices to their highest levels in years, pushing up inflation and threatening growth \u2013 which could push up government borrowing.<\/p>\n
There may also be concerns in the City that the government\u2019s commitment to its fiscal rules could weaken if Starmer were forced out of office after this week\u2019s local elections.<\/p>\n
On Friday, the Guardian reported <\/a>that allies of Greater Manchester mayor Andy Burnham say he has a credible plan to return to Westminster \u201cwithin weeks\u201d.<\/p>\n Analysts at ING warned last week that UK bond yields could rise further on a deeper political crisis, telling clients:<\/p>\n double quotation markBritain\u2019s local elections come at a particularly sensitive moment for UK financial markets. Government bond \u2013 gilt \u2013 yields have just risen above 5% for the first time since 2008, a time when the economy was growing significantly faster than it is today.<\/p>\n Much of the latest spike is down to inflation, but the politics can\u2019t be ignored. Prime Minister Keir Starmer is in a fight for political survival and a bad election night on 7 May could prove fatal.<\/p>\n Share<\/a><\/p>\n Updated at\u00a007.57 EDT<\/p>\n Key events<\/p>\n Show key events only<\/p>\n Please turn on JavaScript to use this feature<\/p>\n Britain\u2019s stock market has hit its lowest level in over a month.<\/p>\n The FTSE 100 share index is now down 167 points at 10,196 points, a drop of 1.6%, and its lowest level since 1 April.<\/p>\n HSBC continues to lead the fallers, now down 6.7%, after reporting a drop in profits this morning.<\/p>\n Share<\/a><\/p>\n The US jobs market appears to have shrugged off the early economic turmoil caused by the Iran war.<\/p>\n The number of job openings at US companies dipped slightly in March, to 6.866m, new data shows, down from 6.922m in February.<\/p>\n The latest JOLTS report also shows that the job openings rate dipped, from 4.2% to 4.1%.<\/p>\n The number of job openings decreased in professional and business services (-318,000) but increased in finance and insurance (+98,000), the US Bureau of Labor Statistics reported.<\/p>\n Share<\/a><\/p>\n Stocks have opened a little higher on Wall Street, as investors noted that oil prices have dipped back today.<\/p>\n The Dow Jones Industrial Average gained 95.2 points, or 0.19%, at the open to 49,037.12.<\/p>\n The S&P 500 rose by almost 0.5%, while the tech-focused Nasdaq gained 0.76%.<\/p>\n Share<\/a>Franco Manca restructuring wins creditors’ approval Pizza chain Franco Manca has won approval from creditors for a restructure under which 16 of its 70 restaurants will close with the likely loss of about 225 jobs.<\/p>\n The sites to go include an outlet in Brixton, the south London suburb which the chain refers to as its \u201cspiritual home\u201d where it first opened as a market stall. Others to go include Bishops Stortford, Cheltenham, Didsbury in Manchester, Glasgow, Hove, Lincoln, Plymouth and London outlets including New Oxford Street, Tottenham Court Road, Bromley, Broadway Market in Hackney, Stoke Newington and Kilburn.<\/p>\n The restructure comes after the company said \u201cexternal cost pressures\u201d including increases in the legal minimum wage, business rates and employers\u2019 national insurance contributions, meant a number of its restaurants were \u201cno longer sustainable.\u201d<\/p>\n The casual dining chain, is part of Fulham Shore, which also owns The Real Greek chain, and is owned by Toridoll, the Japanese operator of Wok to Walk and Marugame Udon, and restaurant sector investment fund Capdesia. The Real Greek is closing all but 19 of its 28 outlets after being bought out of pre-pack administration by Karali Group, the owner of the C\u00f4te restaurant chain, according to the Propel industry newsletter.<\/p>\n Share<\/a>First ever Pret a Manger drive-thru opens near Warrington Pret a Manger opened its first ever drive-thru on Tuesday in its latest bid to find fresh locations to trade.<\/p>\n The outlet in Warrington\u2019s Oakwood Gate service station on the M6 near Warrington, will operate in partnership with service station specialist Motor Fuel Group, which already operates 35 of Pret\u2019s 500 UK outlets. It will have seating for 48 people and EV charging points as well as a drive-thru service.<\/p>\n Ross Warnes, the president of Pret A Manger\u2019s UK & Irish business, said:<\/p>\n double quotation mark\u201cTravel hubs and roadside locations present a huge growth opportunity for Pret, making the launch of our first drive-thru a natural next step in our expansion. It\u2019s all part of our strategy of meeting customers where they are.\u201d<\/p>\n Share<\/a><\/p>\n UK 30-year bond yields continued to rise after hitting their 28-year high his lunchtime, trading as high as 5.778%.<\/p>\n But they\u2019ve now slipped back a little, to 5.75%.<\/p>\n That follows a drop in the oil price today, after Monday\u2019s 5.8% jump, with Brent crude now down 2.6% at $111.40 a barrel.<\/p>\n [Reminder: The UK bond market is catching up with yesterday\u2019s moves, after the bank holiday break yesterday].<\/p>\n Share<\/a><\/p>\n Political uncertainty, rising energy prices and fiscal tensions are all pushing up UK borrowing costs, explains Lale Akoner, global market analyst at eToro:<\/p>\n double quotation mark\u201cGilt yields are rising because markets are starting to price in a more fragile UK outlook than headline data suggests. The combination of political uncertainty, energy sensitivity and fiscal pressure is forcing investors to reassess how much risk they are willing to carry and that adjustment is happening quickly ahead of local elections.<\/p>\n \u201cInvestors are responding by demanding a higher premium to hold UK debt, particularly at the long end, where sensitivity to political and economic risks is greatest. At the same time, demand dynamics have become less stable, amplifying moves in yields.<\/p>\n \u201cIf uncertainty persists, upward pressure on yields is likely to remain, with broader implications for borrowing costs and financial conditions across the economy.\u201d<\/p>\n Share<\/a>Shorter-dated UK bond yields up too<\/p>\n UK borrowing costs are rising across the board today, for short-dated as well as longer-dated bonds.<\/p>\n Two-year gilt yields are up 11 basis points (0.11 of a percentage point) to 4.533%, while give-year gilt yields are up 12bps to 4.6%.<\/p>\n These moves also reflect expectations that the Bank of England will raise rates two or three times to counter the threat of inflation created by the Iran war.<\/p>\n The money markets are currently fully pricing in two interest rate rises this year, with a third expected by February 2027.<\/p>\n Share<\/a>What would a Labour leadership challenge mean for bond markets? Who calls the shots on the bin collections in Sunderland, potholes in Hackney, or schools in Cardiff is not normally of interest to City traders in the multitrillion-pound sovereign bond market.<\/p>\n But for those dealing in UK government debt, Thursday\u2019s local and devolved government elections<\/a> are significantly more important than usual, amid speculation that a dire showing for Keir Starmer\u2019s Labour party could topple him as prime minister.<\/p>\n \u201cUsually local elections should not be a market relevant event, but this has indeed become one,\u201d said Sanjay Raja, the chief UK economist at Deutsche Bank.<\/p>\n double quotation mark\u201cMainly as the repercussions, not just from a leadership challenge, but also any changes to fiscal policy and any pressure on fiscal rules the chancellor had signed up to. That is what the market is really signed up to.\u201d<\/p>\n Here\u2019s the full story:<\/p>\n Share<\/a>RSM UK: Why local elections could reignite political risks for economy<\/p>\n A change in UK prime minister \u2013 or just the prospect of a new PM \u2013 could add to the risks facing the UK economy, a key factor why borrowing costs are rising ahead of Thursday\u2019s local elections.<\/p>\n Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, explains why the markets could react badly if Labour have a bad election (as appears likely<\/a>):<\/p>\n double quotation markFirstly, in the near-term, speculation over when Sir Keir Starmer will be replaced would be enough to raise uncertainty and dampen activity by itself. Second, a messy leadership contest that opens Pandora\u2019s box of potential tax hikes would raise uncertainty even further, potentially prompting firms to cut back on investment, and households to ramp up savings. Indeed, speculation at the last two budgets about tax increases dampened growth in the second half of both the last two years. In H1 2024 and H1 2025, growth averaged 0.7% and 0.4% respectively, before slowing sharply to 0.3% and 0.1% in H2.<\/p>\n \u201cSecondly, whoever replaces Sir Keir is likely to want to spend more. The front runners are currently Angela Rayner and Andy Burnham, both of whom have indicated that they would favour a more interventionist approach to the economy, and would like to see government spending rise further. This has raised red flags among gilt investors and is one reason gilt yields \u2013 the cost of government borrowing \u2013 have risen above 5% for the first time since 2008.<\/p>\n Even if Starmer stays on as PM, Pugh adds, the government will face greater pressure to support households and businesses with energy bills \u2013 that would add to spending levels, pushing up bond yields.<\/p>\n Share<\/a><\/p>\n Updated at\u00a007.48 EDT<\/p>\n The yield on 10-year UK government bonds \u2013 seen as the benchmark for borrowing costs \u2013 is rising too.<\/p>\n 10-year bond yields are up 12 basis points (0.12 of a percentage point) at 5.09%, its highest level since late March (when they were the highest since July 2023).<\/p>\n That reflects concerns that the Iran war could push up UK inflation, putting pressure on the British economy.<\/p>\n![\"Sarah](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/05\/Sarah_Butler_Next_Gen.png\")
Sarah Butler<\/p>\nSarah Butler<\/p>\n![\"Richard](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/05\/Richard_Partington,_R.png\")
Richard Partington<\/p>\n