The gilt market reaction to Keir Starmer’s resignation as Prime Minister has been relatively muted, although the prospect of a new leader and Chancellor have added a new layer of uncertainty, industry figures have stated.

Andy Burnham, fresh from his victory in the Makerfield by-election, is the clear favourite to succeed Starmer, and the relative lack of movement in the gilt market suggested it was prepared for this scenario, according to MFS Investment Management head of developed market debt sovereign research, Peter Goves.

“However, the market will now quickly sharpen its focus onto actual policies and any change in direction and indeed Chancellor,” he added.

Aegon Asset Management investment manager, James Lynch, said Starmer’s resignation announcement had been met with a “shrug of indifference” from the gilt market.

''The best case for the market here is that there is no challenge to Andy Burnham, which will give him time to get his team together and also actually come up with some policies for what will be a fast-approaching budget,” he continued.

“If he is challenged it will become a contest of who can outspend each other the most in order to win power, and the gilt market I am sure will start to move.

''For now, there is relative calm, but it does have an uneasy feel about it.”

PensionBee noted that while gilt markets had remained relatively calm so far, a new Prime Minister added a new later of political uncertainty, and if gilt yields rose this would feed through into pension values and annuity rates.

“Whether the next leader is Andy Burnham or another contender, uncertainty that drags on for too long risks unsettling the bond market,” warned PensionBee VP personal finance, Maike Currie.

“Markets dislike uncertainty more than they dislike any particular politician. Bond investors often care as much about the Chancellor as the Prime Minister.

“A Chancellor with a reputation for fiscal discipline could reassure markets. A more interventionist appointment, or a candidate perceived to be less disciplined with spending could have the opposite effect.”

Currie highlighted that, for pension savers, politics and markets are more closely linked than many realise.

“Most UK workers now save through defined contribution pensions, and many default investment strategies gradually move into bonds and gilts as retirement approaches,” Currie said.

“Pension values therefore remain sensitive to changes in inflation expectations, interest rates and market confidence.”

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