UK Gilt Yields at 18-Year High on Political and Inflation Risks

UK 10-year gilt yields climbed above 5.1%, reaching their highest level since July 2008, while the 30-year gilt yield hit 5.8%, its highest since 1998, amid political instability and renewed inflation concerns. Prime Minister Keir Starmer has stated he will remain in office despite calls from over 70 Labour MPs for his resignation following the party’s poor local election results. Investors fear a leadership change could trigger higher fiscal spending to win back voters, though Starmer noted that a leadership contest has not yet been triggered. Meanwhile, traders are increasing bets on further Bank of England rate hikes, with markets pricing in nearly three additional increases by year-end. Brent crude oil prices have also risen above $105 a barrel after US President Trump rejected Iran’s latest peace proposal as unacceptable.

UK 10-year gilt yields climbed above 5.1%, reaching their highest point since July 2008, as political instability in the UK deepens. Over 70 Labour MPs have urged Prime Minister Keir Starmer to resign following the party’s poor performance in last week’s local elections, with investors worrying that a leadership change could lead to higher fiscal spending in an effort to regain voter support. Meanwhile, concerns persist over the fragile US-Iran ceasefire, with Brent crude oil prices rising above $105 a barrel after US President Trump dismissed Iran’s latest response to peace proposals as unacceptable. Trump, addressing reporters, labeled Iran’s reply a “piece of garbage” and admitted he “didn’t even finish reading it.” The uncertainty has prompted investors to increase bets on further interest rate hikes by the Bank of England, with markets now pricing in nearly three additional increases before year-end.

UK 10 Year Government Bond Yield increased to 5.11%, the highest since July 2008. Over the past 4 weeks, United Kingdom 10Y Bond Yield gained 27.85 basis points, and in the last 12 months, it increased 41.95 basis points.