"30-year gilt yields climbing to their highest level this century as the prime minister stared down a growing chorus of Labour MPs demanding he step aside."
"Investors are now openly pricing in the prospect of a leftward lurch in Labour policy, with the attendant risks of looser fiscal rules, higher gilt issuance and a further squeeze on the cost of capital for British business."
"Higher long-dated gilt yields feed directly into the swap rates that underpin commercial lending, business mortgages and asset finance, raising the prospect of yet another leg up in the borrowing costs faced by Britain's corporate backbone at a time when many are still nursing the legacy of post-pandemic debt."
""A new Labour leader may face pressure to ease the fiscal rules and raise gilt issuance," warned Jim Reid, analyst at Deutsche Bank, capturing the City's central concern that any successor would lean towards higher spending and heavier taxation of the very businesses the Treasury is counting on to drive growth."
30-year gilt yields rose to the highest level this century, with the 30-year yield reaching 5.81% and the 10-year yield rising to 5.1%. The sell-off dragged sterling and equities lower and erased a prior relief rally. A cabinet meeting did not calm market nerves as Labour MPs pressed for the prime minister to step aside. Investors began pricing in a leftward shift in Labour policy, raising risks of looser fiscal rules, higher gilt issuance, and tighter financing conditions for British business. Higher long-dated gilt yields feed into swap rates that underpin commercial lending, business mortgages, and asset finance, increasing borrowing costs for small and medium-sized enterprises still dealing with post-pandemic debt.
Read at Business Matters
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