\u201cAny sign of instability around Prime Minister Keir Starmer or pressure on Chancellor Rachel Reeves immediately feeds into concerns about whether fiscal discipline could weaken,\u201d\u00a0he said. \u201cIf Labour suffers a heavy defeat and internal divisions intensify, gilt markets will start assigning a higher probability to looser fiscal policy, whether through increased spending, diluted rules, or political concessions.\u201d<\/p>\n
The UK enters this political flashpoint with limited room for manoeuvre. Public debt remains close to 100% of GDP, borrowing continues at elevated levels, and gilt issuance is expected to exceed \u00a3250 billion this fiscal year.<\/p>\n
Attention is likely to centre on the long end of the yield curve, where maturities between 10 and 30 years are most exposed to concerns about supply and long-term fiscal sustainability. \u201cThe long end is where the damage showed up during the Liz Truss episode, and it is where it would show up again,\u201d\u00a0Green said. \u201cInvestors demand a higher term premium when confidence slips, and that drives yields sharply higher in those maturities.\u201d<\/p>\n
Sterling is also in focus. Green warned that any erosion of confidence linked to leadership uncertainty or fiscal loosening would likely weaken the pound, feeding imported inflation and reinforcing upward pressure on gilt yields. \u201cCurrency and bonds move together in these situations,\u201d\u00a0he said. \u201cA weaker pound lifts inflation expectations, and that pushes gilt yields higher. It becomes a feedback loop that is difficult to contain once it starts.\u201d<\/p>\n
\u201cThe combination of a potentially massive electoral setback, an organised push against Starmer, and questions over how firmly Reeves can hold the fiscal line creates a clear risk signal for UK bond markets. If those pressures build after the vote, gilt investors will move quickly, pricing in higher borrowing, demanding greater compensation for risk, and pushing yields higher in a way the UK can ill afford.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cAny sign of instability around Prime Minister Keir Starmer or pressure on Chancellor Rachel Reeves immediately feeds into…\n","protected":false},"author":2,"featured_media":30034,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[729,13062,1259,5,6],"class_list":{"0":"post-30033","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-uk","8":"tag-borrowing-costs","9":"tag-gilt","10":"tag-inflation","11":"tag-uk","12":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/116527898852061828","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/30033","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=30033"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/30033\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/30034"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=30033"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=30033"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=30033"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}