When Keir Starmer announced his departure from Downing Street, ten-year gilt yields barely budged. Yet if they had risen, headlines would have blamed political uncertainty around Andy Burnham's potential premiership. Recent months saw yields swing from 4.23% in February to 5.20% in April, with markets initially attributing moves to domestic politics.

A National Institute of Economic and Social Research analysis found the real culprit: oil price shocks and global bond market turbulence. The closure of the Strait of Hormuz drove yields up by roughly 0.6 percentage points, while political risk contributed just 0.06 percentage points. UK electricity market exposure to international energy prices amplifies these effects quickly into inflation.

Burnham has since pledged to maintain fiscal rules, dousing earlier market nerves from his autumn comments about not being "in hock" to bond markets. Unlike the post-lockdown hiring boom of 2022, current labor data shows sluggish conditions with falling pay pressures, reducing inflation concerns. The Bank of England faces less pressure for aggressive rate hikes.

Gilt yields still look attractive versus international peers, reflecting lingering Westminster fears that appear overdone. Burnham may tweak fiscal rules as predecessors have done since 2010, but won't pursue major loosening without Office for Budget Responsibility scrutiny. A Truss-style crisis is unlikely. Political drama has occasionally moved UK asset prices, but markets overestimate its impact on gilts.