Gilts tumbled after Manchester Mayor Andy Burnham secured a pathway to potentially challenge Keir Starmer for the UK prime minister’s job, threatening a fresh bout of political instability that investors fear could result in more expansive fiscal policy.

The yield on 10-year gilts jumped as much as 12 basis points to 5.11%, with global concerns about high energy costs and inflation also driving the move. Burnham’s announcement that he intends to run for Parliament — a prerequisite to challenge Starmer — put the pound on track for its worst week since 2024 against the dollar.