‘There’s a risk of another Liz Truss moment’: City raises spectre of bond market meltdown again

A rise in borrowing costs and warnings to avoid a “Liz Truss moment”. As Keir Starmer faces a potential leadership challenge, the spectre of the bond market looms large. Amid febrile conditions in Westminster, the prospect of Britain switching prime ministers for a sixth time in seven years has fuelled a sharp sell-off in the market for UK government debt. As Starmer’s grip on power appeared to be slipping away, the yield – in effect the interest rate – on 30-year government bonds, or gilts, briefly reached 5.8% on Tuesday, the highest level since 1998 , before slipping back after a challenge failed to immediately materialise. However, selling pressure has been maintained on the UK government’s bonds relative to its G7 peers, with investors fearing a return to political instability in Britain and a leftwing shift by Labour involving higher levels of borrowing. “The markets hate uncertainty, but they hate a political vacuum even more,” said Nigel Green, the chief executive of deVere Group. “A cabinet resignation followed by a leadership fight would signal that the government is losing control of itself while investors are already questioning the country’s fiscal direction. “Markets can cope with ideology of any stripe if it is disciplined and coherent. …