UK 10-year gilt yields rose further above 4.5%, extending recent volatility as political uncertainty weighed on markets. Concerns over Prime Minister Keir Starmer’s leadership intensified after the resignation of his chief of staff amid the Lord Peter Mandelson controversy. Starmer has faced renewed calls to step down from within a fractious Labour Party, particularly after scrutiny surrounding his appointment of Mandelson as UK ambassador to the US, given Mandelson’s past links to Jeffrey Epstein. However, Skills Minister Baroness Smith dismissed speculation of his resignation, saying he remains focused on domestic priorities. Meanwhile, markets have increased bets on Bank of England rate cuts. Although the central bank kept interest rates unchanged at 3.75% in a split decision, policymakers adopted a more dovish tone than expected, indicating that CPI inflation is likely to move back toward the 2% target from April.
