UK borrowing costs rise and pound falls as leadership drama continues

UK government borrowing costs jumped to multi-decade highs and the pound weakened after Andy Burnham entered the Labour leadership contest, stoking market fears of higher fiscal deficits and greater political uncertainty. The 10-year gilt yield climbed above 5.14% (its highest since 2008) and 30-year gilts hit about 5.82% (a 28-year high). Sterling fell about 0.3% to $1.337, and the FTSE 100 dropped roughly 1.7% as investors priced in the prospect of a less market-friendly administration. Global risk factors — including a rise in Brent crude above $109 a barrel — also fed concerns around inflation and borrowing costs. Analysts cited a potential shift left in policy and prolonged leadership turmoil as drivers of foreign selling of gilts and pound weakness.