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UK Political Uncertainty Sends Gilt Yields to Generational Highs

British gilt markets stabilized Monday after heavy selling pressure last week as bond traders assessed political risks to fiscal stability. The 10-year gilt yield held at 5 percent, while the 30-year instrument fell 2 basis points to 5 percent after surging to 1998 levels on Friday.

Greater Manchester Mayor Andy Burnham was cleared to challenge Prime Minister Keir Starmer in a parliamentary by-election. He sought to reassure investors over the weekend that fiscal discipline would be maintained under his leadership. Burnham, viewed as left-leaning within his party, walked back earlier comments suggesting Britain had ceded control to bond markets.

Political turmoil followed poor Labour performance in recent local elections. Borrowing costs reached generational highs as investors grew uncertain whether a new prime minister would relax self-imposed spending limits. Starmer faces potential leadership challenges from several Labour colleagues, including former Health Secretary Wes Streeting and former deputy Angela Rayner.