LONDON, May 12 (Xinhua) -- British government bond yields surged to multi-decade highs on Tuesday as mounting political turmoil surrounding Prime Minister Keir Starmer intensified investor concerns over the country's fiscal outlook, inflation risks and potential policy uncertainty.
Britain's 30-year gilt yield climbed as high as 5.81 percent in morning trading, the highest level since 1998, before easing slightly later in the session. The benchmark 10-year gilt yield rose above 5.1 percent to 5.13 percent, its highest level since July 2008.
The rise in gilt yields extended beyond long-dated debt, with shorter-term borrowing costs also moving higher, reflecting broader market unease over Britain's political and economic trajectory.
The sharp increase in borrowing costs came amid a second consecutive day of heavy selling in the British bond market, as investors reacted to deepening instability within the ruling Labour Party following its poor performance in local elections held on May 7.
British media reported that more than 80 Labour lawmakers had publicly called on Starmer to resign after the election setback, while several senior cabinet ministers were said to have urged the prime minister to consider setting out a timetable for his departure.
Despite mounting pressure, Starmer insisted he would remain in office. Speaking at a cabinet meeting on Tuesday morning, he said the Labour Party's formal mechanism for challenging a leader had not been triggered and pledged to "get on with governing."
Analysts said investors were increasingly concerned that a potential leadership contest or a weakened government could lead to higher public spending aimed at rebuilding political support, further straining Britain's already pressured public finances.
At the same time, persistent inflation concerns also weighed on the bond market. Traders increased bets on further monetary tightening by the Bank of England, amid expectations that interest rates could remain higher for longer.
British bank stocks also came under pressure on Tuesday after JPMorgan raised expectations that a future Labour leadership could increase taxes on the banking sector.
In a note to clients, JPMorgan analysts said their base-case scenario now assumed Britain's banking surcharge could rise from 3 percent to 5 percent, in line with proposals outlined in a previously leaked memo linked to Deputy Prime Minister Angela Rayner.
Shares in Barclays, NatWest and Lloyds fell around 4 percent in morning trading, reflecting growing investor concerns over the combined impact of political instability, fiscal pressure and potential tax increases on the British financial sector. ■
