t's too soon to say the bond markets have turned on Andy Burnham. Tuesday's spike in gilt yields, taking the UK's 30-year borrowing costs to their highest level since 1998, was part of an international sell-off of government debt.
The main contributors are well-known. The Iran war, by increasing the cost of energy, has overturned the comforting start-of-the-year thesis of falling global inflation and interest rates. A plunging Japanese yen has kicked away another assumed source of financial stability. The US treasury secretary, Scott Bessent, hasn't calmed nerves with his solo, and so far futile, attempt to bring down US yields. Meanwhile, the early stage of the AI revolution is an exercise in issuing squillions of debt before long-term returns on capital can possibly be assessed meaningfully.
From the point of view of the mythical bond vigilante, in these circumstances it's only logical to demand a higher return to lend to profligate governments with high debt ratios, which is most of them.
In a narrow sense, then, UK gilts were just moving with the market at a moment of rising financial risks in all directions. It's just that the UK was already uncomfortably placed at the cold edge of the pack with the highest borrowing rates in the G7, a status largely reflecting a dismal 20-year record in keeping a lid on inflation and, especially now, a dependency on energy imports that stood at 43% in 2025.
It is also true, unfortunately, that six weeks into the job Burnham and the chancellor, John Healey, have said nothing to make bond investors rethink the UK's status. Investors have heard the dutiful commitment to Rachel Reeves's fiscal rules, but Burnham's Commons speech on Tuesday carried little sense of urgency about the UK's financial predicament, or appreciation of how 10-year gilt yields at 5.2% will cause damage if sustained for long.
More "public control" of utilities – the theme Burnham constantly returns to – may be desirable and play well on the backbenches. But, even when the ambiguous meaning is made clearer, how does it translate into, say, substantially lower costs of building infrastructure? Should it really be a top economic priority?
"Markets are sceptical that 'devolution' and 'control' are levers for lower government-led inflation," said the Panmure Liberum economist Simon French. "Burnham/Healey's unenviable task is to prove they are the right levers. If they fail then a very painful period of financial repression/demand side-led disinflation will be necessary."
There is an uncomfortable sense that the bond market expects next month's budget to be a bigger event than Burnham and Healey will produce. The tone of Burnham's Commons speech was "the last thing investors wanted to hear", said the former Goldman Sachs economist Jim O'Neill – quite a verdict from a friendly critic who was being lined up for a role in government until recently.
But one can see his point. He told the BBC that high government borrowing costs would force Labour to get real about dealing with the triple lock on the state pension and "excessive" welfare spending. There has been little rolling of the pitch, as they say in Westminster, in either of those directions to date.
It may be, of course, that impressions are mistaken and that next month's promised 10-year economic plan turns out to be a big exercise in addressing energy costs, defence spending, social care, housing shortages and all the other main challenges. But it is also easy to imagine an alternative script in which hard decisions are deferred and the UK-specific action in the bond market turns uglier – especially if, say, disruption to global energy markets looks likely to last the winter.
Labour has spent 2026 defenestrating one leader and anointing another. It needs something to show for it. Burnham speaks of giving businesses and consumers breathing space from the cost of living pressures. That task is easier when the government itself is getting some breathing space from the bond markets. Whatever the chosen mix of spending cuts and tax rises, the budget needs details.