Political Uncertainty Sends British Bond Yields Higher

Political uncertainty surrounding Prime Minister Keir Starmer raised British government bond yields, driven by staff resignations and internal party dissent. Although yields later aligned with U.S. Treasuries, concerns about Starmer's leadership impact fiscal policy sentiment. Upcoming economic data and gilt auctions will further influence investor decisions.

British government bond yields initially surged on Monday as investors reevaluated the political stability of Prime Minister Keir Starmer. The resignation of Starmer's chief of staff, Morgan McSweeney, has added to investor uncertainty, particularly due to Starmer's controversial appointment of Peter Mandelson.

Doubts within the Labour Party about Starmer's capabilities are fueling concerns. Last yielding 4.533%, the 10-year gilt peaked earlier at 4.554%, aligning later with U.S. Treasuries. Speculation swirls about Starmer's leadership, potentially influencing Britain's fiscal trajectory.

Market strategist Benjamin Picton notes that McSweeney's resignation momentarily shields Starmer amid worsening poll results and backbench dissent. Eyes are on Tuesday's five-year gilt auction and economic figures later this week, both pivotal for investor sentiment.

(With inputs from agencies.)