UK Rates Strategy: Optimism in the price

Research evidence excerpt

UK Rates Strategy: Optimism in the price

24 June 2026

Fixed Income

RatesUK Rates Strategy

Optimism in the price United Kingdom

◆ Markets have taken news of the resignation of the UK Prime Daniela Russell

Minister in their stride, with yields falling and gilts outperforming Head of UK Rates Strategy

HSBC Bank plc

daniela.russell@hsbcib.com

◆ However, a successor would still face conflicting pressures +44 20 7991 1352

from the parliamentary Labour Party and financial markets

◆ With market-friendly news and dovish risks now more

adequately priced in, we are closing our ‘receive GBP 1Y1Y

OIS’ trade idea as it has moved close to its target

All change, please

UK Prime Minister, Sir Keir Starmer, has announced he will resign, triggering a

leadership contest. Candidates must declare by 9 July, but as Wes Streeting, who

had been seen as a potential challenger, has backed the favourite, Andy Burnham

(Polymarket, 23 June 2026), this raises the possibility of a swift transition that could

see him take power on 17 July.

Gilts have continued to rally and outperform

Gilts have continued to perform strongly against a backdrop of fresh political change.

Dovish UK data, renewed talk of rate cuts by MPC member, Alan Taylor (Bloomberg,

23 June 2026), and the equity sell-off have been part of the reason. However, it also

reflects a perception of reduced uncertainty due to the prospect of an uncontested

‘coronation’ politically and an expectation that a potentially more market-friendly

chancellor, such as Wes Streeting, may be appointed. Consequently, the spread

between gilts and other G7 countries has compressed.

Reality awaits

Whether these richer valuations can be sustained remains to be seen. Reality may hit

quickly: the political and economic fundamentals are unchanged.