UK borrowing costs jump as uncertainty over PM's future continues

UK government borrowing costs surged to near-financial crisis levels on Tuesday as political uncertainty over Prime Minister Sir Keir Starmer's future rattled markets ^[1][2].

The effective interest rate on 10-year borrowing briefly hit 5.13%, a level last seen during the 2008 global financial crisis ^[1][2]. Meanwhile, the yield on 30-year bonds reached 5.80%, its highest point since 1998 ^[1][2]. Costs rose across two, five, 10, and 30-year terms ^[1]. The market turmoil followed reports that approximately 80 Labour MPs have called for Sir Keir to resign after recent election results ^[1][2]. In response, the FTSE 100 index fell 0.5% and the pound dropped 0.5% against the dollar ^[1][2]. Analysts warned the political instability threatens to undermine fiscal discipline. "The UK's already fragile fiscal position means that investors will be on edge for any signs of fiscal loosening," said Anna Macdonald of Hargreaves Lansdown ^[1][2]. The Prime Minister and Chancellor Rachel Reeves have reiterated their commitment to strict borrowing rules in an attempt to calm investor nerves ^[2].