Capital Economics: Replacing Stammer may raise UK government bond yields and weaken the pound.

Ruth Gregory and Paul Dales from Capital Economics stated in a report that if either Keir Starmer or Rachel Reeves were to replace the positions of Prime Minister and Chancellor of the Exchequer in the UK, government bond yields could rise and the pound could weaken. They said that what happens next will depend on the actions of the new leadership. Starmer continues to face pressure due to his handling of former US Ambassador Peter Mandelson. They added that if he is replaced by a team that weakens fiscal safeguards, promises significant increases in public spending and borrowing, this could lead to a sharp rise in 10-year government bond yields, possibly exceeding 5%, and cause the pound to fall. However, if the government is forced to abandon these plans, repeating the mistakes of Liz Truss's "mini budget" incident, then this situation may only be temporary.