King Charles sets out fragile government’s agenda amid gilt sell-off

Britain’s King Charles III set out the agenda of a fragile U.K. government on Wednesday after Prime Minister Keir Starmer faced down calls for his resignation that sparked heavy selling pressure on gilts in the previous session.

The State Opening of Parliament and King’s Speech, a grand affair in which the monarch presents the government’s legislative agenda for the next parliamentary period, took place after Starmer’s political leadership remained under threat following the political fallout of the ruling Labour Party’s poor performance in local elections last week.

Starmer appears to have seen off any immediate leadership challenge for now, and will hope that today’s pomp, pageantry and policy agenda can shift attention away from the current crisis.

That doesn’t mean the leadership threat has gone away. Ahead of King’s address in the House of Lords Wednesday morning, Starmer had a brief meeting, reportedly lasting only 17 minutes, with one of his main leadership rivals, Wes Streeting.

Streeting — the U.K’s health secretary — had reportedly asked to meet privately with Starmer on Tuesday but had been refused. That came after a crunch cabinet meeting in which Starmer vowed to keep leading the Labour Party, despite over 80 lawmakers (at that point) calling on the PM to resign.

Markets had their own say on the political crisis in the U.K., which has seen four prime ministers in the past four years; yields on U.K. government bonds, known as gilts, saw double-digit gains on Tuesday as investors feared that any leadership would lead to a loosening of the fiscal discipline implemented by Starmer’s Chancellor Rachel Reeves.

On Wednesday, as Starmer’s position in office look more assured, yields fell 2 to 6 basis points with the interest rate on the benchmark 10-year gilt hovering around 5.067%.

Jim O’Neill, former chairman of Goldman Sachs Asset Management and former U.K. treasury minister, told CNBC on Wednesday that the U.K. had to start being a “bit more adult.”

“It shocks me that voters are treating the leadership of the country like some kind of gameshow where you have a few months of the year and if we don’t like you you’re out, as evidenced by the scale of support for Reform in the council elections,” he told CNBC’s “Squawk Box Europe.”

“It doesn’t look to me that any of these voters seem to be concerned about the lack of growth or stability of financial markets …on top of that, the idea that, constitutionally, some ambitious person can just come in and replace the current PM … I think that is a really dangerous thing to do, given the fragility of our current electoral status,” he added.

Neil Wilson, Saxo UK investor strategist, said today’s King’s Speech may offer Starmer a reprieve, but might not be a stay of execution.

“The King’s Speech may see a pause in the plotting, but bond markets are clearly on edge, and I would not be surprised if…