The UK 10-year gilt yield slipped to 4.25%, marking its lowest level since December 2024, as investors reacted to the outcome of a key district election and its implications for Prime Minister Keir Starmer. The ruling UK Labour Party lost Gorton and Denton, near Manchester, a seat it had comfortably held in the 2024 general election, with the Green Party taking first place and Labour finishing third behind Reform UK. The defeat intensifies uncertainty over the positions of Starmer and Chancellor Rachel Reeves, amid fears they could be replaced by ministers advocating higher fiscal spending, further straining the UK’s public finances. Economic sentiment also weakened, with the UK GfK Consumer Confidence Index falling unexpectedly in February due to rising unemployment. At the same time, recent strong fiscal data, a dovish stance from the Bank of England, softer employment figures, and subdued inflation helped soothe market nerves.
