UK borrowing costs jump after cabinet ministers urge Starmer to quit<\/p>\n
Newsflash: UK government borrowing costs have risen at the start of bond market trading.<\/p>\n
Political uncertainty is gripping the markets, after Keir Starmer was urged to set out an orderly timetable for his departure<\/a> ahead of this morning\u2019s cabinet meeting.<\/p>\n The yield, or interest rate, on benchmark 10-year UK gilts has risen by almost 10 basis points (0.1 of a percentage point) to 5.1%, up from 5% last night.<\/p>\n Bond yields rise when prices fall, and this morning\u2019s move adds to a rise in borrowing costs yesterday.<\/p>\n Longer-dated borrowing costs have also risen. The yield on 30-year UK bonds has risen by 10 basis points to over 5.77%, very close to the 28-year high (5.78%) set earlier this month<\/a>.<\/p>\n Michael Brown, senior research strategist at brokerage Pepperstone, says bond investors are concerned about a possible change of prime minister:<\/p>\n double quotation markThe market\u2019s main concern here, and the reason for this Gilt underperformance, is twofold \u2013 firstly, that a new PM would shift to the left, and loosen\/scrap the UK\u2019s current fiscal rules; and, secondly, that doing so would exacerbate the UK\u2019s inflation problem.<\/p>\n With political uncertainty likely to persist for a while, and the fiscal rhetoric only set to ramp up, those considering buying the dip in Gilts may be minded to wait a while.<\/p>\n Share<\/a><\/p>\n Updated at\u00a003.09 EDT<\/p>\n Key events<\/p>\n Show key events only<\/p>\n Please turn on JavaScript to use this feature<\/p>\n This morning\u2019s jump in UK borrowing costs comes after Darren Jones, the chief secretary to the PM, told broadcasters that Keir Starmer is \u2018listening to colleagues\u2019.<\/p>\n Jones told Sky News:<\/p>\n double quotation markI spoke to the prime minister last night, as you would expect, and he is talking to colleagues who have raised issues yesterday.<\/p>\n But he was also very clear, as I\u2019m sure all of my colleagues are, that coming into the office this morning, as we all are doing, we\u2019re absolutely focussed on our jobs, on delivering the things that we\u2019ve promised to deliver for the public.<\/p>\n My colleague Andrew Sparrow is live-blogging all the developments on another dramatic day in UK politics:<\/p>\n Share<\/a>MUFG: leadership contest would be negative for pound and UK bonds<\/p>\n The pound is continuing to slide \u2013 now down two-thirds of a cent against the US dollar at $1.354.<\/p>\n Political uncertainty in the UK is hurting the pound, as well as driving up bond yields, reports Lee Hardman, currency expert at Japanese bank MUFG.<\/p>\n Hardman told clients;<\/p>\n double quotation markSo far the market moves have been relatively modest but are beginning to reflect building unease over the future of Prime Minister Keir Starmer who is facing growing pressure from within the Labour party to step down.<\/p>\n With more than 70 Labour MPs publicly calling for Starmer to stand down, and reports that home secretary <\/a>Shabana<\/a> <\/a>Mahmood<\/a>, foreign secretary <\/a>Yvette<\/a> <\/a>Cooper<\/a> and defence secretary John Healey are privately urging Starmer to consider plans for handing control to a successor, Hardman adds:<\/p>\n double quotation markPressure intensified yesterday on Starmer after four ministerial aides quit the government saying they no longer believed he could tun things around.<\/p>\n The latest developments increasingly look like the end of the road for Keir Stamer as prime minister. A leadership contest whether immediate or more drawn out will add to political uncertainty in the near-term which is negative for the pound and gilts. The risk of a bigger sell-off will increase if Labour shift towards the left.<\/p>\n Share<\/a>FTSE 100 hits lowest since 31 March<\/p>\n The London stock market has opened in the red.<\/p>\n The blue-chip FTSE 100 share index fell by as much as 1.1% at the start of trading, down 117 points to 10,152 points. That\u2019s its lowest level since the end of March.<\/p>\n Banks are leading the fallers; NatWest (-4.6%), Lloyds Banking Group (-4.1%) and Barclays (-4%).<\/p>\n Derren Nathan, head of equity research at Hargreaves Lansdown, says the \u201cseemingly unbreakable diplomatic deadlock between Tehran and Washington\u201d is hurting stocks.<\/p>\n He adds:<\/p>\n double quotation markBack at home, rising government borrowing costs aren\u2019t helping either, with Prime Minister Sir Keir Starmer\u2019s leadership under increasing pressure. The potential for a fiscally looser successor may be weighing on rate expectations, but the inflationary influence of higher-for-longer oil prices is likely to be the bigger driver.<\/p>\n Share<\/a><\/p>\n Updated at\u00a003.17 EDT<\/p>\n UK borrowing costs jump after cabinet ministers urge Starmer to quit<\/p>\n Newsflash: UK government borrowing costs have risen at the start of bond market trading.<\/p>\n Political uncertainty is gripping the markets, after Keir Starmer was urged to set out an orderly timetable for his departure<\/a> ahead of this morning\u2019s cabinet meeting.<\/p>\n The yield, or interest rate, on benchmark 10-year UK gilts has risen by almost 10 basis points (0.1 of a percentage point) to 5.1%, up from 5% last night.<\/p>\n Bond yields rise when prices fall, and this morning\u2019s move adds to a rise in borrowing costs yesterday.<\/p>\n Longer-dated borrowing costs have also risen. The yield on 30-year UK bonds has risen by 10 basis points to over 5.77%, very close to the 28-year high (5.78%) set earlier this month<\/a>.<\/p>\n Michael Brown, senior research strategist at brokerage Pepperstone, says bond investors are concerned about a possible change of prime minister:<\/p>\n double quotation markThe market\u2019s main concern here, and the reason for this Gilt underperformance, is twofold \u2013 firstly, that a new PM would shift to the left, and loosen\/scrap the UK\u2019s current fiscal rules; and, secondly, that doing so would exacerbate the UK\u2019s inflation problem.<\/p>\n With political uncertainty likely to persist for a while, and the fiscal rhetoric only set to ramp up, those considering buying the dip in Gilts may be minded to wait a while.<\/p>\n Share<\/a><\/p>\n Updated at\u00a003.09 EDT<\/p>\n Investors ramp up bets on Bank of England rate hikes<\/p>\n The City financial markets have lifted their forecasts for UK interest rate rises this year.<\/p>\n The money markets are now pricing in 68 basis points (0.68 of a percentage point) of interest rate increases from the Bank of England by December.<\/p>\n That\u2019s up from 56bps yesterday.<\/p>\n This indicates traders are more confident the BoE will raise interest rates twice this year (which would increase Bank rate by 50bps), and see a third hike as more possible.<\/p>\n That follows a rise in the oil price today (Brent crude is up 1.25% to $105.50 a barrel), which is inflationary.<\/p>\n It may also reflect the political uncertainty (if a new prime minister loosened fiscal policy through higher spending and borrowing, the BoE might respond with tighter monetary policy to dampen the inflation risks).<\/p>\n Share<\/a><\/p>\n Investment bank Jefferies\u2019 \u2018base case scenario\u2019 is that there is \u2018a managed exit\u2019 for Keir Starmer.<\/p>\n Jefferies economist Mohit Kumar told clients this morning that any replacement would likely be left leaning and be negative for the pound, and longer-dated government bonds.<\/p>\n Share<\/a>Introduction: Pound ‘weighed down by political uncertainty’ over Starmer’s future<\/p>\n Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.<\/p>\n Another UK political crisis is looming over the City of London today, as prime minister Sir Keir Starmer faces more calls to set out a timetable for his departure.<\/p>\n The bond market is fimly in the spotlight, after government borrowing costs jumped yesterday<\/a> as Starmer\u2019s \u2018make-or-break\u2019 speech failed to reassure investors, and prompted some Labour MPs to fall for his departure.<\/p>\n The Guardian reported last night that two senior cabinet ministers \u2013 Yvette Cooper, the foreign secretary, and Shabana Mahmood, the home secretary \u2013 were understood to have told the prime minister he should oversee an orderly transition of power, after last week\u2019s local elections.<\/p>\n The pound has dropped against the dollar this morning, down half a cent to $1.3560.<\/p>\n Sterling is being \u201cweighed down by political uncertainty as PM Keir Starmer faces pressure to step down\u201d, reports IG analyst Tony Sycamore.<\/p>\n City investors will be watching Westminster, where Starmer is due to hold a cabinet meeting today.<\/p>\n Bond yields (which rise when price fall) could push higher if traders anticipate that a change of leadership would lead to higher spending, and more borrowing, and a break from the government\u2019s fiscal rules<\/a>.<\/p>\n Jim Reid, strategist at Deutsche Bank, explains:<\/p>\n double quotation markWith a Cabinet meeting expected this morning, today could be a big day in determining Starmer\u2019s future.<\/p>\n In response to the uncertainty, 10-year UK gilt yields rose +8.6bps to 5.00% yesterday, whilst the 30-year yield rose +9.3bps to 5.67%, given expectations that a new Labour leader may face pressure to ease the fiscal rules and raise gilt issuance.<\/p>\n The agenda<\/p>\n 10am BST: ZEW economic sentiment index for the eurozone<\/p>\n 11am BST: NFIB US business optimism index<\/p>\n 1.30pm BST: US CPI inflation report for April<\/p>\n