The cost of Government borrowing has ticked slightly higher on Friday morning, following Andy Burnham’s win in the Makerfield by-election.
The 10-year yield on UK gilts – Government bonds – rose by 0.05 percentage points to 4.81% shortly after the market opened.
The move is largely similar to changes in the value of European bonds, which have been impacted by a fresh rise in oil prices overnight.
On Friday morning, the Office for National Statistics (ONS) also reported higher-than-expected Government borrowing figures for May.
The rise in monthly borrowing, which was driven by record May debt interest costs, is also likely to have contributed to the increase in gilt yields.
Gilts yields move counter to the value of the bonds, meaning they have dipped in value during earlier trading.
Meanwhile, the value of the pound was roughly flat for the day at 1.320 versus the dollar.
It had fallen by as much as 0.5% following Mr Burnham’s election but has seen these losses pull back entirely within two hours.
Meanwhile, the FTSE 100 opened marginally lower, dipping by 0.02% to 10,397.68 points.
The market reaction comes after Mr Burnham defeated Reform UK’s Robert Kenyon in Makerfield by 9,231 votes, up from 5,399 in 2024, and Labour’s vote share increased by 9.61%.
His election has set up a potential leadership challenge to Prime Minister Sir Keir Starmer, with Mr Burnham stating that Labour has “final chance to change” after his election.
The relatively muted market reaction indicates that most traders had already priced in a victory by the favourite for the by-election, while global factors also continue to heavily influence the UK’s financial markets.
Chris Beauchamp, chief market analyst at IG, said: “It’s hard to disentangle any weakness in sterling from a potential change of PM from the surge in US dollar strength after this week’s hawkish Fed meeting.
“Burnham’s win means a changeover is now all but certain, but questions of policy and the chancellor appointment will be the bigger driver.”
