UK 10-year gilt yields were broadly steady around 4.85% after Prime Minister Keir Starmer announced he would step down, raising the prospect of Greater Manchester Mayor Andy Burnham becoming the next Labour leader. Burnham is now regarded as a frontrunner, but investors are primarily focused on what a new administration could mean for fiscal policy and the future trajectory of public borrowing. Markets are also monitoring potential candidates to succeed Chancellor Rachel Reeves, should a change in party leadership trigger a wider cabinet reshuffle.
So far, Burnham has offered limited detail on his economic agenda, adding to uncertainty around future spending commitments and debt dynamics. With UK public finances already under strain, investors remain wary of any shift that might entail higher government borrowing. Gilt yields have retreated in recent weeks amid optimism over a potential US–Iran peace deal, having previously climbed to an 18-year high as heightened Middle East tensions drove energy prices higher and fuelled inflation concerns.
