Stable Market Minute - 13th May 2026: Bond Market Wobbles as UK Political Crisis Deepens

UK gilt yields hit levels unseen since 1998 as political pressure mounts, US inflation surprises to the upside, and copper prints record highs. Here's what treasurers need to know.

Key takeaways

• UK gilt yields hit their highest level since 1998 on political pressure surrounding the Chancellor — two-year swap rates briefly exceeded 4.6%.
• US CPI came in at 3.8%, a three-year high, and for the first time in three years inflation has outpaced wage growth.
• Despite a mid-session sell-off, US equities (S&P 500 and NASDAQ) printed fresh all-time highs by Wednesday morning.
• Copper is at a record high, up 30% since December — a signal of strong underlying global industrial demand.
• GBP/USD is rangebound between 1.3500–1.3600; sterling upside is limited while UK political risk remains elevated.
• Key upcoming releases: US PPI (today) and UK Q1 GDP (Thursday) — both could move sterling and gilts sharply.

UK Gilt Yields Spike to Levels Not Seen Since 1998

UK long-term borrowing costs surged on Tuesday to their highest level since 1998. The catalyst was renewed political pressure on Chancellor Rachel Reeves, with reports of calls for her resignation rattling the gilt market. Two-year swap rates climbed to just above 4.6% before cooling slightly as markets reassessed the probability of her departure.

The Financial Times raised a pointed question that treasurers should consider: how much longer can the gilt market continue to function as an informal check on political instability? Historically, sharp moves in UK sovereign borrowing costs have forced policy U-turns — the practical effect is that bond markets are once again acting as a confidence barometer for UK governance.

All Eyes on Reeves vs Streeting Ahead of the King's Speech

The political backdrop remains messy. A reported showdown between Reeves and Health Secretary Wes Streeting is expected to come to a head ahead of the King's Speech. Until there is clarity on the Chancellor's position, UK risk assets are likely to remain under pressure and sterling will struggle to find meaningful upside.

US Inflation Comes in Hot at 3.8% — A Three-Year High

US CPI for the latest reading came in at 3.8%, a three-year high and broadly in line with expectations given the inflationary backdrop from tariffs and supply-chain pressures. More significantly, this is the first time in three years that inflation has outstripped wage growth — a development that erodes real household purchasing power and complicates the Federal Reserve's path to rate cuts.

US equity markets fell during Tuesday's session in the run-up to and immediately after the inflation print. However, both the S&P 500 and the NASDAQ printed fresh all-time highs by Wednesday morning. President Trump's social media post signalling a 'buy stocks now' moment provided additional momentum, a pattern markets have learned to react to.

Copper Hits a Record High — Up 30% Since December

Copper prices have reached their highest level on record, extending a rally of approximately 30% since December 2024. Copper is widely regarded as a leading indicator of global industrial activity. A move of this magnitude suggests that, whatever the noise around tariffs and geopolitics, underlying demand for the metal — driven by electrification, data centre construction, and manufacturing — remains robust.

Currency Ranges: Sterling and Euro Hold Tight Bands

GBP/USD has been trading in a narrow range between 1.3500 and 1.3600. EUR/USD is similarly range-bound, oscillating between approximately 1.1718 and comparable support levels. GBP/EUR reached 1.1600 at the start of May before retreating to around 1.1490, and has since settled near 1.1550. With UK political uncertainty unresolved, sterling is unlikely to break decisively higher in the near term.

The FTSE 100 has been trading sideways, finding support around the 10,160 level. Upside is limited while domestic political risk persists, though the index's significant weighting in commodity exporters — including copper producers — provides a partial offset.

What to Watch: US PPI Today, UK GDP Tomorrow

Later today, the US Producer Price Index (excluding food and energy) is due. This reading will give markets a clearer picture of pipeline inflation pressures and may influence rate expectations further. Tomorrow brings UK Q1 GDP figures — a critical data point given the political turbulence. A weak growth print would add pressure on the government and could weigh further on sterling and gilts.

Next steps

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