UK long-term borrowing costs surged to their highest point in nearly 30 years amid apprehensions about a potential change in Labour leadership, but subsequently eased as support for Prime Minister Keir Starmer solidified among cabinet ministers. The yield on 30-year government bonds—essentially the interest rate—rose 11 basis points to 5.794% on Tuesday morning, marking the highest level since May 1998. This spike was fueled by investor concerns over possible shifts in Labour’s tax and spending strategies.
However, yields later retreated slightly following assurances from Starmer during a cabinet meeting that he would not resign and that no leadership challenge process had been initiated. Prior to this meeting, Miatta Fahnbulleh became the first minister to resign following Labour’s significant losses in the recent local and devolved elections, urging Starmer to step down.
Starmer reiterated, “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.” This message was aimed at calming the financial markets and reassuring both investors and party members of stability within Labour’s leadership.
Following the cabinet meeting, key figures including Business Secretary Peter Kyle, Technology Secretary Liz Kendall, and Housing Secretary Steve Reed expressed their backing for Starmer to reporters. Their endorsement, coupled with Starmer’s firm stance, appeared to stabilize the situation, bringing some relief to anxious markets.
As a result, the benchmark 10-year yield on UK government bonds dipped below 5.1%, after reaching 5.13% earlier in the day. Additionally, the 30-year yield decreased to 5.76%, having earlier touched a new 28-year high of 5.81%. These developments suggest that the show of unity within the Labour cabinet contributed to alleviating investor concerns over the party’s financial policies and leadership stability.