Finance
UK bond yields climb as PM Starmer struggles with Mandelson crisis
Published by Global Banking & Finance Review®
Posted on February 9, 2026
2 min readLast updated: February 9, 2026
Quick Summary
UK bond yields rise amid political uncertainty over PM Starmer's future, impacting investor confidence and fiscal policy outlook.
UK bond yields climb as PM Starmer struggles with Mandelson crisis
Political Challenges Impacting UK Bond Yields
Feb 9 (Reuters) - British government bond yields rose as investors increasingly called into question the political future of Prime Minister Keir Starmer following the resignation of his director of communications, a day after his chief of staff quit.
Resignation of Key Advisors
Starmer's director of communications, Tim Allan, announced his departure on Monday, sending gilt yields to session highs.
Market Reactions and Gilt Performance
The prime minister's chief of staff, Morgan McSweeney, quit on Sunday, saying he took responsibility for advising Starmer to appoint Peter Mandelson as ambassador to the U.S. despite his known links to the late, disgraced financier Jeffrey Epstein.
Future Outlook for Starmer's Leadership
The 10-year gilt yield rose to a high of 4.569% at 1127 GMT on Monday, up 5 basis points on the day, before falling back slightly when Starmer said his government would "go forward from here".
Long-dated British government borrowing costs, which are sensitive to worries over the budget outlook, rose by similar amounts. Overall, gilts underperformed against their U.S., French and German counterparts.
Some lawmakers in Starmer's governing Labour Party have openly criticised his judgment and investors are bracing for a possible challenge to his leadership.
"The decision by his most senior adviser to fall on his sword may buy Starmer some time, but signs of widespread discontent on the backbench, compounded by diabolically bad poll results, are creating the impression that his days are numbered," said Benjamin Picton, senior market strategist at Rabobank, referring to McSweeney's resignation on Sunday.
On February 5, when there was a previous bout of concerns about Starmer's future, 10-year gilt yields rose to their highest since November 20 at 4.605% before retreating sharply after the Bank of England came closer than expected to cutting interest rates in that day's decision.
However, gilt auctions in recent weeks have shown exceptionally strong levels of demand. The sale of a five-year gilt due on Tuesday will provide the next test of investor appetite. Economic growth data is due on Thursday.
(Reporting by Andy BruceEditing by Emelia Sithole-Matarise and Gareth Jones)
Key Takeaways
- •UK bond yields rose due to political uncertainty.
- •Keir Starmer's leadership is under scrutiny.
- •Investors are concerned about British fiscal policy.
- •10-year gilt yields reached 4.554% before easing.
- •Strong demand for gilts despite political challenges.
Frequently Asked Questions about UK bond yields climb as PM Starmer struggles with Mandelson crisis
1What are bond yields?
Bond yields represent the return an investor can expect to earn from holding a bond until maturity. They are influenced by interest rates and the creditworthiness of the issuer.
