UK Borrowing Costs Rise to Highest Since 1998 In Test for Starmer

The UK’s long-term borrowing costs rose to a 28-year high, a fresh headache for Prime Minister Keir Starmer as he tries to cling to power. Soaring energy prices and Britain’s messy politics helped push the yield on 30-year gilts to 5.78% today.

The Middle East conflict has driven inflation and bond yields higher around the world, but the UK stands out. Starmer’s Labour party is facing potentially big losses at local elections this week, and the prime minister himself is vulnerable to a leadership challenge.

The worry is that Labour will have to move left and boost spending, putting more pressure on the UK’s finances. Another threat comes from rising oil prices, which are stoking inflation and could force the central bank to raise interest rates.

Trouble is also brewing for Starmer in Scotland, where a revitalized Scottish National Party is seeking to capitalize on his weakened position in a national vote that’s just days away. A bad result for Labour here could reinvigorate Scotland’s push for independence. — Philip Lagerkranser

HSBC’s profit missed estimates, in part because of a surprise charge related to collapsed UK mortgage lender Market Financial Solutions. Among $1.3 billion in expected credit losses HSBC booked for the first quarter was a $400 million provision we’re told was tied to the failure of MFS. HSBC’s shares fell the most in a month after the earnings miss.