UK borrowing costs rise and sterling falls as traders brace for Burnham
City traders react to the prospect of Andy Burnham challenging Keir Starmer for the Labour leadership
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UK government bond yields have surged and the pound has fallen to a five-week low as markets react to Andy Burnham's potential bid for the Labour leadership, signaling investor concern over political instability and future fiscal policy.
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UK government borrowing costs have jumped at the start of trading, and the pound has fallen, as City traders respond to the news that Andy Burnham now has a chance to become Labour’s next leader.
UK bond prices have dropped at the start of trading, which pushes up the yield on these gilts, while the pound has dropped against the US dollar. Yesterday, Burnham was handed a potential route back to parliament when Josh Simons, MP for Makerfield, announced that he is resigning to free up a seat for Burnham.
Burnham, the Greater Manchester mayor, confirmed he would ask Labour’s ruling national executive committee (NEC) to allow him to stand in the contest. Allies of Starmer confirmed that he would not seek to block him. Should he win and return to parliament, Burnham appears to be in a strong position to challenge Keir Starmer for the leadership of the Labour Party.
This morning, the yield on UK 10-year bond is up 11 basis points to 5.11%, suggesting concerns that the UK could aim to borrow more under a new prime minister. Thirty-year bond yields are up 11 bps to 5.76%. The pound has hit its lowest level in five weeks, down more than half a cent to $1.333.
Kathleen Brooks, research director at XTB, noted that plans to topple the Prime Minister have burst into the open. The pound is weakening after a sharp drop on Thursday, signaling that Burnham is perceived as the least market-friendly candidate.
Meanwhile, the Sunday Times reported on charitable donations, noting that hedge fund manager Sir Chris Hohn tops the list. Additionally, the Patriotic Millionaires UK group criticized the current wealth distribution, calling the latest rich list a "smack in the face" for those struggling with the cost of living. Author JK Rowling's wealth has risen to £975m, nearing billionaire status, while Rishi Sunak and Akshata Murty’s net worth has declined to £563m.
