Closing post
That’s all for today.
Jonas Goltermann, chief markets economist at Capital Economics, has a non-too-cheery thought to end the day:
The surge in long-term Gilt yields over recent weeks owes as much to the rise in energy prices as it does to the UK’s latest political melodrama. On both fronts, it looks increasingly as though things may get worse before they get better.
Here’s our news story about the swings in the bond market today:
While our Politics Liveblog has all the key developments:
Updated
Spike in bond yields 'could be worse than the Truss crisis in 2022'
After a rocky session, UK government bond prices were significantly lower as trading drew to an end in London.
That shows that the day of political drama, as Keir Starmer fought off efforts to make him step down, have pushed up UK borrowing costs as the markets anticipated the possibility of a more left-wing successor.
The UK 10-year bond yield, which hit its highest since 2008 this morning at 5.13%, has eased back to 5.1%, up from 5% yesterday (that’s a rise of 10 basis points).
Longer-dated 30-year bond yields hit their highest since 1998 earlier today, at 5.81%, and at 5pm was more than 9bps higher at 5.76%.
After surging on speculation that Starmer could be forced to lay out a departure timetable, yields eased slightly as some cabinet members – and Labour MPs – backed him.
However, with several ministers quitting today, the PM still appears in a perilous position.
Kathleen Brooks, research director at XTB, suggests the bond markets could save Starmer, given the dangers of higher borrowing costs for the UK’s public finances.
Brooks writes:
The UK still has the highest borrowing costs of any G7 member, and our yields have risen at the fastest rate since the Middle East war started. Until a challenge from the left of the Labour party is eradicated, or the government embarks on growth-positive economic policy, we do not see UK bond yields substantially falling from here.
The pound has also stabilized, and GBP/USD is just above $1.35. The market is willing to wait and see but remains extremely sensitive to news out of Westminster. Ultimately, it could be the bond market that saves Starmer, as it’s unlikely bond traders would trust anyone else at this stage.
But, with UK 10-year yields at their highest level since 2008, and 30-year yields back at 1998 levels, the recent upheaval and spike in yields could be worse than the Truss crisis in 2022.
