The pound has declined and UK government borrowing prices have risen to an 18-year high as Andy Burnham’s decision to run in a by-election has further complicated the struggle for the Labour leadership.
The UK’s borrowing costs have increased more than those of other European governments, according to analysts, because of market worries that a Burnham-led government would borrow more money.
At one point on Friday, the 10-year bond yield basically, the interest rate charged to the UK government for a 10-year loan rose to 5.17%, the highest level since 2008. After plunging dramatically late on Thursday following Burnham’s news, the pound lost 0.3% versus the dollar to about $1.336.
The pound was 1.5% lower this week, according to Kathleen Brooks, research director at XTB.Given that Wes Streeting’s resignation did not have the same detrimental impact on the pound, Burnham is the least market-friendly of all the candidates, she said. Three times in the previous week, including the record peak on Friday, 10-year rates have risen above levels last attained in 2008.
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