‘There’s a risk of another Liz Truss moment’: City raises spectre of bond market meltdown again
Summary
The UK is facing rising borrowing costs as political uncertainty grows with the possibility of another change in prime minister. Investors fear that a leadership challenge to Labour’s Keir Starmer could increase government borrowing and lead to a repeat of the 2022 bond market crisis during Liz Truss’s brief time as prime minister.Key Facts
- The interest rate on 30-year UK government bonds briefly rose to 5.8%, the highest since 1998.
- Political instability in the UK has raised fears among investors about higher government borrowing.
- Keir Starmer, the Labour leader and prime minister, faces a potential leadership challenge.
- Investors warn that increased borrowing without clear economic growth could hurt market confidence.
- Some Labour MPs show frustration with current tight tax and spending policies but are aware of financial market risks.
- The UK’s national debt is about 100% of GDP, the highest since the 1960s.
- Rising global interest rates and geopolitical issues, like the Iran war, have increased the cost of UK debt.
- Analysts say any new leader would still face significant spending pressure and high taxes, limiting policy options.
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