UK 30-year gilt yield hits 5.797 percent, highest since 1998, as more than 50 Labour MPs demand Starmer's resignation
UK 30-year gilt yields rose to 5.797 percent on Tuesday, their highest level since 1998, and 10-year yields hit 5.116 percent near their 2008 peak, as Prime Minister Keir Starmer fought to remain in office after more than 50 of his own Labour MPs called for him to quit. The pound fell roughly 0.8 percent against the dollar and also dropped against the euro, while the FTSE 100 shed about 0.5 percent. Hargreaves Lansdown head of equity research Derren Nathan said "the potential for a fiscally looser successor may be weighing" on top of high oil prices, while Saxo UK strategist Neil Wilson said markets "dislike a lack of certainty over who runs a government".
British government borrowing costs surged on Tuesday, with the yield on the 30-year gilt reaching 5.797 percent, its highest level since 1998, and the 10-year rate hitting 5.116 percent, near its 2008 peak. The pound fell about 0.8 percent against the dollar and also weakened against the euro. London's FTSE 100 lost around 0.5 percent, mirroring losses elsewhere in Europe.
The trigger is political. Prime Minister Keir Starmer is fighting to stay in office after more than 50 of his own Labour MPs demanded his resignation in the wake of last week's local and regional elections, which delivered heavy Labour losses and major gains for the hard-right Reform UK and the left-wing Greens. Starmer, who became prime minister in July 2024 after a Labour landslide, vowed on Monday to prove his doubters wrong.
The market reaction reflects who might replace him as much as Starmer's own position. Derren Nathan, head of equity research at Hargreaves Lansdown, said: "Starmer's leadership [is] under increasing pressure. The potential for a fiscally looser successor may be weighing" — alongside high oil prices feeding inflation. Saxo UK investor strategist Neil Wilson said: "Markets tend to dislike a lack of certainty over who runs a government. The UK fiscal position is already fragile and likely to become worse should a left-leaning ticket prioritise spending — and that makes inflation stickier."
The backdrop for the revolt is a string of policy missteps and the Mandelson affair. Starmer's appointment and subsequent sacking of Peter Mandelson as UK ambassador to Washington, after revelations about Mandelson's ties to sex offender Jeffrey Epstein, deepened the impression of a government on the back foot. The UK economy has struggled to grow during Labour's 22 months in office, although Starmer has won praise for resisting Donald Trump's line on Iran.
The yield spike caps a fortnight of escalating gilt-market stress directly tied to Starmer's position. The 30-year first hit a 1998 high on May 5; yields then fell and the pound rose on May 8 after Starmer publicly refused to resign in the aftermath of the local-election losses. By May 11 gilts were weakening again as the MP-led pressure built, and on Tuesday they reached a new post-1998 peak as the headcount of Labour resignation calls crossed 50.