British bonds rose following the success of Prime Minister Starmer's likely rival

Yields on British government bonds rose following Andy Burnham’s election victory—Burnham is a potential challenger to Prime Minister Keir Starmer. The scale of his victory gives Bernam’s supporters hope that he will replace Starmer “within a few days” and move into Downing Street, The Guardian reports. However, oil prices and the Bank of England’s decision are also affecting yields on British bonds on Friday, notes Bloomberg.

Yields on 10-year British government bonds rose by about five basis points, according to Bloomberg. Their performance was slightly weaker than that of comparable European bonds, by about one basis point, the agency notes. The pound sterling recovered its losses for the day and was trading slightly above $1.32. British stocks edged lower: the FTSE 100 index was down by about 0.1% at the time of this writing. By comparison, the pan-European Stoxx 600 index was up more than 0.1%, while Germany’s DAX rose 0.5%.

According to Bloomberg, the performance of British bonds is influenced by a combination of political factors and rising oil prices: Brent futures rose 0.7% on June 19, with prices once again exceeding $80 per barrel. On the political front, bonds are being affected by the threat of a change in the prime minister, fears of increased budget spending, and concerns about an inflationary shock, the agency reports.

Data on the U.K.'s budget deficit was also released on Friday: it stood at 23.3 billion pounds in May, while economists had forecast only 18.9 billion pounds, according to Bloomberg.

Uncertainty over leadership and future policy poses a risk of further bond volatility, warned Franklin Templeton analyst David Zan during an appearance on Bloomberg TV.

Greater Manchester Mayor Andy Burnham has won the by-election in the Makerfield constituency in northwest England, defeating Nigel Farage, the candidate for the right-wing populist party Reform UK, according to the BBC. This paves the way for Burnham to vie for the leadership of the Labour Party and the position of prime minister, currently held by Keir Starmer, the publication explained.

Bernam won the election by such a wide margin that his supporters hope he will be able to become prime minister “within a few days,” according to The Guardian. A source for the publication said before the polls closed that “Keir [Starmer] will continue to fight,” but that this “may depend” on the scale of Bernam’s victory.

Although Bernam’s statements during the campaign caused concern among investors, he has since shifted his position, and it is therefore unclear whether his policies will actually entail an increase in government spending, according to Bloomberg. In a Financial Times survey, investors in British bonds named Bernam as the least market-friendly among Starmer’s potential successors.

This article was AI-translated and verified by a human editor