UK Borrowing Costs Jump as Uncertainty Over PM's Future Continues
UK 10-year government bond yields rose sharply as uncertainty over the prime minister's future continues. Investors are unsettled by the prospect of a leadership change and its possible impact on fiscal policy. Sterling slipped against the dollar.
UK 10-year government bond yields rose by about 15 basis points during the session, approaching 4.9%. Yields on 30-year debt climbed to 5.4%, the highest level in several months. The move came amid continued uncertainty over whether the prime minister will remain in office.
Rumours of cabinet resignations and opposition calls for an early election are keeping markets on edge. The Office for Budget Responsibility has warned that the deficit could push the public debt-to-GDP ratio above 100% by year-end. A change of government could open the door to fresh fiscal loosening, deepening investor concerns.
Sterling fell by 0.8% against the dollar and dipped below the 1.24 mark. London's FTSE 100 index closed slightly lower, dragged down by property and retail stocks. Investment banks said the Bank of England may have to postpone the rate cuts it had planned for the year.
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