The UK’s long-term borrowing costs reached a nearly three-decade high recently, driven by investor concerns over potential shifts in Labour’s leadership and its tax and spending policies. The yield on 30-year government bonds surged by 11 basis points to 5.794% on Tuesday morning, marking the highest level since May 1998. However, the yield later eased slightly as key cabinet ministers expressed their support for Labour leader Keir Starmer.
Amid speculation about a leadership change, Prime Minister Keir Starmer assured his cabinet on Tuesday morning that he would not step down, noting that no leadership challenge process had been initiated. This declaration followed the resignation of Miatta Fahnbulleh, the first minister to resign after Labour’s notable losses in the recent local and devolved elections, who had called for Starmer’s resignation.
In a statement, Starmer emphasized the importance of governance, saying, “The Labour party has a process for challenging a leader and that has not been triggered. The country expects us to get on with governing. That is what I am doing and what we must do as a cabinet.” His remarks were complemented by public endorsements from several cabinet ministers, including Business Secretary Peter Kyle, Technology Secretary Liz Kendall, and Housing Secretary Steve Reed, who all reaffirmed their backing for Starmer.
The show of cabinet solidarity appeared to stabilize financial markets, leading to a slight reduction in borrowing costs. The benchmark 10-year yield on UK government bonds dipped to below 5.1%, after reaching 5.13% earlier in the day. Similarly, the 30-year yield, which had hit a new 28-year high of 5.81%, fell back to 5.76%, indicating a calming effect on the market jitters.