UK 10-year gilt yields retreated toward 4.5%, approaching their lowest levels since late January, as investors contended with renewed political uncertainty. The bond market opened the week under strain following the resignation of Prime Minister Keir Starmer’s chief of staff amid the Lord Peter Mandelson scandal, fueling speculation about Starmer’s own future. Yields were highly volatile on Monday, briefly rising about eight basis points, particularly after the leader of Scottish Labour publicly urged Starmer to resign. Market sentiment later steadied as cabinet ministers rallied behind the prime minister, reassuring investors.
At the same time, expectations for Bank of England rate cuts have strengthened. Although the Bank held its benchmark rate at 3.75% in a split decision, policymakers adopted a more dovish stance than markets had anticipated, indicating that CPI inflation is likely to drift back toward the 2% target from April.
