With the yield on 10-year UK government bonds staring down the barrel of a 5% handle, traders are laser-focused on four "internal" questions that will likely dictate the near-term outlook for Gilts:

1. Will Sir Keir Starmer’s premiership survive the fallout from last Thursday’s local elections?

If not,

2. Who takes the keys to Number 10?

3. Is the transition orderly, or will it be a period of prolonged volatility?

4. Does Rachel Reeves remain at the Treasury to guard fiscal discipline?

In a market this sensitive, the domestic “political risk premium” is dominating the external (energy/supply chain) influence.

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