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From Truss Chaos to Starmer Struggles: Can Labour Tame Bond Markets and the Pound?

ended 23. May 2025

During the chaos of the Liz Truss 2022 premiership, and her bungled mini-Budget, the UK 10-year gilt yield spiked to 4.42% due to unfunded tax cuts. Today, the 10-year gilt yield is at 4.74%.

6 responses from the Newspage community

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Tony Redondo
Founder at Cosmos Currency Exchange
UK 10-year gilt yields, now 4.74%, top the 4.42% peak of Liz Truss’s 2022 crisis. Under Starmer’s Labour government, the pound has been and will remain volatile. A £70B budget, £40B tax hikes, record April borrowing, and 3.5% inflation, nearly double the BoE’s target fuel unease. Growth has stagnated and Reeve’s £10B fiscal headroom looks woefully inadequate. The Pound, at a 14-month low in Jan against the Dollar has seen recent gains post-Moody’s US downgrade and tariff fears but may weaken again if UK fundamentals falter. Investors doubt growth, with rising yields and unemployment. Yields hit 4.925% but may drop to 4% if inflation cools although trade shocks could push them to 5.5%. Bond markets, known to “vote out” governments, threaten Starmer and Reeves (already on record low approval ratings) if fiscal trust erodes. Its currently less chaotic than 2022, but unease persists.
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Ken James
Director at Contractor Mortgage Services
How much rope will the UK give the PM Starmer and Chancellor Rachel Reeves? There’s recognition that Labour has inherited a sluggish economy and tight fiscal space, but there is only so much blaming of the Conservatives they can use and the milage on that get out of jail card is wearing thin. We're not seeing acute volatility yet, but bond markets are clearly signalling and there is a constant concern about debt sustainability, especially if growth underwhelms. should Labour lose control of the fiscal narrative or global conditions tighten it is entirely plausible, especially if inflation proves sticky or the BoE delays rate cuts that the markets might begin pricing in serious credibility risk or downgrade prospects — at that point, political pressure will escalate and the Chancellor’s position could indeed become vulnerable.
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Scott Gallacher
Director at Rowley Turton
While gilt yields are now higher than during the Truss crisis, this isn’t 2022 — markets aren’t panicking, but they are clearly uneasy. The global backdrop has changed, with higher interest rates across the board, but Labour still lacks a clear economic strategy. U-turns like the winter fuel allowance reflect reactive politics, not strategic leadership. Rising National Insurance costs are also hitting UK businesses hard, choking investment and undermining Rachel Reeves’s growth agenda. Stability alone isn’t enough — investors want direction. Without it, borrowing costs could keep rising, and the bond vigilantes may well return. The real risk isn’t just how high yields go — it’s how long the Chancellor can hold the markets’ confidence.
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Rob Peters
Principal at Simple Fast Mortgage
“Gilt yields hitting 4.74% above the Truss-era spike definitely raises eyebrows. But unlike the mini-Budget chaos of 2022, current market jitters aren’t derived from unfunded fiscal shockwaves. However, global inflation persistence, higher US Treasury yields, and concerns about the UK’s growth potential are weighing on investor confidence.

Markets aren’t panicking, but they are cautious. The concern isn’t about a crisis just yet, but if bond yields keep climbing, borrowing costs will rise across the board. That puts pressure on the Chancellor, mortgage holders, and the broader economy. Labour must walk a tightrope and stimulate growth without spooking the markets.”
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Aisha Hossain
Founder at Selhaya
For globally-minded businesses like ours, currency stability is not just welcome — it’s essential. A stronger pound allows us to plan confidently, manage costs more effectively, and protect the integrity of our pricing across international markets. What the industry needs now isn’t fireworks or rhetoric — it’s consistency. Political uncertainty undermines commercial confidence. If Labour wants to be seen as serious economic stewards, they need to ensure that brands like ours can build with predictability — not volatility.
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Faisal Sheikh
Managing Director at Monmouth Capital
The absolute yield is less important than how it compares to other major government bond yields.

In autumn 2022, US, EU and UK government bond yields were all rising - but the period of panic in UK gilt yields following the Truss / Kwarteng Budget saw them rise much faster for a few weeks, before the Bank of England intervened.

Contrast that to the recent period. US treasury yields are the outlier, moving sharply higher compared to the UK and EU. The fact that UK yields are higher than they were during the Truss premiership doesn't in itself tell you much.