UK 30-Year Yields Top 1998 High as Political Crisis Deepens

UK 30-Year Yields Top 1998 High as Political Crisis Deepens 1 / 3 UK 30-Year Yields Top 1998 High as Political Crisis Deepens James Hirai and Alice Gledhill Tue, May 12, 2026 at 5:12 PM GMT+7 4 min read NWG LYG (Bloomberg) -- The UK bond market tumbled, driving long-term bond yields back to the highest in nearly three decades, as speculation over Prime Minister Keir Starmer future as prime minister renewed concern about the weakened state of Britain’s finances. Iran Makes New Offer on Uranium in Response to US, WSJ Says Inside a Year of Chaos and Conflict at Kevin Hart’s Media Company Epstein s Black Card: How He Moved Women With His Amex Modi Asks Indians to Stop Buying Gold, Hitting Jewelry Stocks Gilts fell across the board, with the 30-year yield briefly touching 5.81%, the highest since 1998. The pound slid 0.7% to $1.3517. NatWest Group Plc and Lloyds Banking Group Plc led losses among UK stocks as analysts speculated that the industry faces higher taxes under a new administration. Even as Starmer rebuffed calls for his resignation in a Cabinet meeting on Tuesday, investors were analyzing what his possible replacements would mean for the bond market. The chief concern is that any new Labour leader would be more left-leaning and may loosen the fiscal rules that have restrained borrowing. With the economy already facing a crunch from higher energy prices and faster inflation, the fragmentation of British politics has become another source of market anxiety. “The simple reality is that this latest pressure in a now long line of political upheavals merely adds to the view that no matter who is in power, no matter their political leaning, there does not appear to be a credible plan to restore the country’s finances,” said Matt Cairns, head of fixed income strategy at Rabobank. “Gilts will remain under pressure, regardless of today’s outcome.” Gilts pared some of the moves later in the session. The 30-year yield rose as much as 14 basis points and was trading at 5.76% as of 11:08 a.m. in London. In equities, the UK moves were broadly in line with the rest of the global market. The FTSE 100 Index dipped 0.5% and the mid-cap index fell 1.1%. While bond markets around the world have sold off recently as oil prices stay stubbornly high, the combination of the UK’s heavy debt load, political infighting and a sluggish economy have left it especially vulnerable. Chancellor of the Exchequer Rachel Reeves has previously said debt costs account for around £1 in every £10 the government spends. And with borrowing costs climbing higher, the government will have to spend even more. The 20 basis-point jump in the 10-year yield since Friday adds an estimated £2 billion to the debt interest bill by the end of the decade, according to Bloomberg Economics. “If the BOE hikes rates to the extent currently priced by markets, the negative growth implications could show a stark contrast to the US and drag cable lower. Alternatively, if concerns over the growth outlook for the UK sees the BOE take a more measured approach, the pound could lose its rate advantage at the front-end of the curve over peers. UK yields will likely remain elevated as markets fret over the possibility of a fiscally looser future government, a pound negative.” —Adam Linton, macro strategist. For the full analysis, click here. Among the likely Labour candidates, Health Secretary Wes Streeting is seen as one of the most market friendly replacements. He’s vouched for a deeper trading relationship with the European Union, citing it as the best way to grow Britain’s economy. He added that he’s “really uncomfortable” with the level of taxation in the UK, saying that the government is asking a lot from individual taxpayers and businesses. “Even if Starmer resigns, the political uncertainty is unlikely to end,” said Roger Lee, head of equity strategy at Cavendish. “To stabilize the gilt market the government may have to commit to the fiscal rules and the only candidate seemingly prepared to do that is Wes Streeting.” Angela Rayner, another possible contender, has attempted to reassure investors that the Labour Party will keep a tight grip on public finances. But she previously led a cabinet revolt against Chancellor Rachel Reeves’ plans to slash welfare spending. She’s also faced scrutiny for her personal tax affairs, with her failure to pay enough property tax forcing her out of her role as deputy prime minister last year. Many are also expecting a challenge from Manchester Mayor Andy Burnham, even though he is not currently a member of parliament. He’s criticized the government’s economic approach, claiming the country is “in hock to the bond markets.” Last year, Burnham promised to increase government borrowing by £40 billion to pay for more council homes to be built. Members of Starmer’s administration were quick to dismiss this, warning that he risks spooking the bond market. For investors, the recent episode is reviving memories of the mar

UK 30-Year Yields Top 1998 High as Political Crisis Deepens

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