Bond ‘vigilantes’ are circling the UK after Labour’s election bloodbath sparked fears of a lurch to the Left.
Sir Keir Starmer yesterday insisted he will not ‘walk away and plunge the country into chaos’, calming financial markets.
But analysts warned that investors are braced for what comes next, as some Labour MPs urge the Prime Minister to set a timetable for his departure.
It is feared a Left-wing leader such as Andy Burnham, Angela Rayner or Ed Miliband would mean higher spending funded by tax hikes and borrowing, sparking a bond market backlash.
Two of a kind: It is feared a Left-wing leader such as Andy Burnham or Angela Rayner would mean higher spending funded by tax hikes and borrowing, sparking a bond market backlash
UK borrowing costs fell yesterday, with the ten-year gilt yield at around 4.9 per cent. But Neil Wilson, UK strategist at Saxo, warned: ‘Bond vigilantes are lurking.’
Matthew Ryan, head of market strategy at Ebury, added: ‘This calm may prove fleeting as the real story isn’t the results themselves, but what comes next.
‘A lurch to the Left would likely bring bigger spending pledges, funded by tax hikes and heavier gilt issuance. Yields would climb. The threat of fiscal instability could create a toxic mix for sterling.’
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