UK 10-year gilt yields inched down to 5.03% as investors largely brushed aside domestic political uncertainty, instead drawing support from optimism around the US–China summit and its potential to bolster global trade, alongside robust UK growth data. The economy expanded by 0.6% in Q1 2026, taking annual growth to 1.1%, underpinned by an unexpectedly strong 0.3% increase in output in March.
Political tensions, however, are intensifying amid growing speculation over a leadership challenge to Prime Minister Keir Starmer. Health Secretary Wes Streeting — widely seen as the most market-friendly contender — is expected to resign this week and could formally launch a leadership bid as early as today. At the same time, Angela Rayner was cleared this morning by HMRC in a tax investigation, potentially removing a key obstacle to her entering the race.
On monetary policy, Bank of England Deputy Governor Sarah Breeden said the ongoing conflict in the Middle East is “much less likely” to trigger an inflation spike comparable to 2022, adding that any further interest rate increases, if needed, could be deferred until later this year.
