Ten-year gilt yields just spiked by more than 10 bps on rumors that UK Chancellor Rachel Reeves was about to resign or be ousted.
As Bloomberg reports, Starmer’s press secretary, Sophie Nazemi, quickly clarified his position to reporters after PMQs, saying that Reeves was going nowhere.
“She has the prime minister’s full backing,” Nazemi said.
“He’s said it repeatedly.”
The combination of Starmer’s failure to back his chancellor, and Reeves’ tears, prompted speculation about her position until the Treasury clarified that the reason for her demeanor was a personal issue.
“It’s a personal matter, which – as you would expect – we are not going to get into,” the Treasury said in a statement.
“The chancellor will be working out of Downing Street this afternoon.”
A tear just rolled down the Chancellor’s cheek at #PMQs as the PM refuses to answer whether or not she’ll stay in her job.
Hayfever, or something else? pic.twitter.com/HPXXQlDNo9
— Paul Brand (@PaulBrandITV) July 2, 2025
But, as Bloomberg’s Simon White notes, the rapidity of the move shows the precariousness of the UK’s debt situation.
The government had planned a series of cuts to welfare and sickness benefits, but had to drastically scale them back in the face of huge opposition from backbench MPs.
The watered down changes are estimated to deliver no savings overall.
A new chancellor might drop Reeves’ commitment to not borrow more for day-to-day activities, or increase spending, justifying a deepening concern for the gilt market.
Yields are still near their day’s highs, while a risk measure for the UK, based on asset swaps, country bond spreads and basis swaps, has widened notably.
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