Bond investors including BNP Paribas Asset Management , Neuberger Berman and Allspring Global Investments are predicting a vote in a small northern constituency will ignite another bout of volatility in the UK’s $3 trillion debt market. The risk is that a win by Labour candidate Andy Burnham in the Makerfield by-election on June 18 will allow him to challenge Prime Minister Keir Starmer for the to...
Bond investors including BNP Paribas Asset Management , Neuberger Berman and Allspring Global Investments are predicting a vote in a small northern constituency will ignite another bout of volatility in the UK’s $3 trillion debt market. The risk is that a win by Labour candidate Andy Burnham in the Makerfield by-election on June 18 will allow him to challenge Prime Minister Keir Starmer for the top job, spelling huge uncertainty for gilts. While Burnham has rowed back on comments last year when he appeared to dismiss the role of bond markets, little is known about his plans for the country’s finances were he to take over at 10 Downing St. “At the moment, it’s purely tactical heading into next week,” said Kostas Deslis , portfolio manager and senior trader at Neuberger, who says his trades are geared to a three-day horizon. “The PM is someone that is a known quantity in the market. We have an unknown quantity that can come through.” Ten-year gilt yields , the main benchmark measure of the nation’s borrowing costs, hit a nearly two-decade high in May as oil soared and Labour lost local elections at the start of the month. The political defeat prompted the member of Parliament from Makerfield to step down, giving Burnham a path into the House of Commons — and a potential leadership challenge against Starmer. Burnham last week confirmed his interest in joining any effort to challenge the prime minister for leadership of the Labour Party if he got into Parliament. Starmer, meanwhile, has signaled his desire to fight on, saying he’s not going to walk away from Britain’s top political office, setting the stage for a drawn-out battle. While yields have fallen since, Deslis and others say they’re wary of longer-maturity government debt, which typically reacts more to changes in government fiscal policy. In some cases they say yields would have to go almost 40 basis points higher on 30-year notes before they would feel they’re being adequately compensated. Burnham’s view of m...