Mr Burnham caused a jump in borrowing costs in September after saying that Britain was too “in hock to the bond market”.
Investor concern is increasing as a leadership crisis engulfs the top of the Government. Almost 100 Labour MPs have demanded that Sir Keir resign as Prime Minister in the wake of last week’s local elections’ heavy defeat, and four ministers have resigned in protest.
Wes Streeting, the Health Secretary, is expected to resign on Thursday and launch a formal challenge to Sir Keir’s leadership.
Mr Bezalel said Jupiter had cut its holdings of UK government bonds “because we were worried about that political risk”. The move came before the local elections in anticipation of a wipe-out for Labour. He added that Jupiter still held some five-year and 10-year gilts.
Separately, Nicolas Bickel, an investment adviser at Edmond de Rothschild, said the bank was “staying away from longer-dated gilts at this stage” given the “prospect of political instability, looser fiscal policy and even a snap election”. Mr Bickel added that “political instability could trigger gilt selling in an already illiquid market”.
Jefferies said it was avoiding bets on longer-term government bonds globally amid growing concerns about inflation and mounting debt.
However, Mohit Kumar, the bank’s chief European economist, said Jefferies was “most worried about the UK” given the “additional impact from the ongoing political crisis”.
Kevin Thozet, a member of the investment committee at French asset manager Carmignac, agreed that UK bonds were “particularly vulnerable” given Britain was already one of the most exposed countries to the inflation crisis triggered by the war in Iran.
Addressing Sir Keir’s future, Mr Kumar wrote in a note to clients: “We still think that a managed exit would be the most likely outcome. But any replacement is likely to be towards the Left and would further add to pressure” on longer-term UK government bonds.
Borrowing costs
Long-term government borrowing costs are close to 28-year highs. The yield, or interest rate, on 30-year gilts fell slightly to 5.73pc on Monday after hitting its highest level since 1998 a day earlier.
Benchmark 10-year gilts are still above 5pc, a level the market considers worryingly high. It exceeds the peak of 4.5pc seen in the aftermath of Liz Truss’s 2022 mini-Budget, when the Bank of England was forced to step in and halt a runaway spiral in borrowing costs.