Borrowing prices edge larger as doubts over Starmer’s future develop

Borrowing costs are edging higher as concerns over the Prime Minister’s ability to survive the Peter Mandelson scandal grow.

Gilt yields started to rise on Wednesday evening after the Prime Minister admitted he knew of Peter Mandelson’s friendship with Jeffrey Epstein before appointing him as US ambassador.

This morning, ten-year bond yields rose to 4.589 per cent, up around 3 basis points, while 30-year gilt yields were up 3 points to 5.375 per cent, their highest level since the Autumn Budget.

The yield gap between two and 10 year gilts reached the widest point in eight years.

Starmer has come under pressure from members of his own party, prompting calls that he might face a leadership challenge, with investors concerned about who might replace him.

Future in doubt: There is growing speculation that the PM will not survive the scandal

While Starmer and Reeves have stressed their commitment to their self-imposed fiscal rules, investors worry about a possible successor’s approach. 

The pressure is also weighing on the pound, which is down 0.5 per cent versus the dollar at $1.3582.

The market is expecting the Bank of England to keep its main interest rate at 3.75 per cent at its meeting today.

Elsewhere, the FTSE 100 opened in the red, after disappointing results from Shell, Vodafone and Anglo American.

Vodafone is down over 5 per cent after it revealed a 0.5 per cent decline in UK service revenue in third quarter. 

Shell missed profit forecasts after taking a hit from lower oil prices, while Anglo cut its copper production guidance for the year.

The software stock sell-off showed some signs of slowing down, with the London Stock Exchange Group, Relx and Experian up between 3 and 5 per cent.

While Wall Street suffered a second day of volatility in software stocks, the S&P 500 is expected to open slightly higher.

Gold has slipped back below $5,000 and silver plunged 9 per cent as market turbulence continued.

‘With talks ongoing to try and solve the conflict in Ukraine and negotiations planned between the US and Iran, the easing of geopolitical tensions has dulled demand for safe havens a little,’ said Susannah Streeter of Wealth Club.

‘Concerns about an attack on the independence of the US Federal Reserve, which risked seeing the central bank shrug off troublesome inflation, had also pushed up the precious metal. 

‘But there’s now an expectation a harder line will be taken, given comments from Fed governor Lisa Cooke, that she’d vote against further cuts.’