UK government bond prices slumped and sterling weakened on Wednesday after Prime Minister Keir Starmer stopped short of guaranteeing that Chancellor of the Exchequer Rachel Reeves would stay in her post. Ten-year gilt yields spiked about 20 basis points to above 4.6% and 30-year yields topped 5.4%, marking the sharpest one-day sell-off since the October 2022 market turmoil. The pound fell roughly 1.2% against the dollar and 0.8% versus the euro as traders weighed whether a successor might loosen fiscal rules. Market nerves were fuelled by dramatic scenes in Prime Minister’s Questions, where Reeves appeared tearful minutes after Starmer dodged a question about her future from Conservative leader Kemi Badenoch. Treasury officials said the tears stemmed from a personal matter and followed an earlier altercation with Commons Speaker Lindsay Hoyle, but speculation quickly centred on whether Starmer was preparing to replace her, with bond desks citing Pat McFadden as a potential alternative. The sell-off came a day after Labour watered down its flagship welfare bill to placate more than 100 rebel MPs. The last-minute concession removed most of the planned £4.6 billion in benefit savings, blowing a fiscal hole of about £5 billion in Reeves’s budget arithmetic and raising doubts over how the government will meet its borrowing and debt targets in the autumn statement. Amid the market rout, No. 10 issued an unscheduled statement insisting Reeves “is going nowhere”. Late in the day Starmer told broadcasters the chancellor would remain in post “for many years to come”, seeking to reassure investors that the government’s fiscal framework remains intact. Whether the pledge calms gilt traders and Labour backbenchers will determine if Wednesday’s volatility proves a blip or the start of a deeper credibility test for the year-old administration.