British Prime Minister Keir Starmer vowed Monday to "face up to the big challenges" facing the U.K. in a speech meant to halt a leadership revolt, and within hours one Labour MP began openly collecting names to force him out as 10-year gilt yields touched 4.98 percent.

The speech, billed by Starmer's office as a reset after last week's council-election rout, instead crystallized a contest. Labour MP Catherine West told the BBC, in the CNBC account, "around two hours after Starmer's speech" that she was informing Downing Street she would gather the names of colleagues demanding the prime minister set a timetable for his departure. The bond sell-off strengthened on her announcement, with yields up by around 7 basis points to 4.98 percent by 7:20 a.m. ET, according to CNBC.

What Starmer said

Starmer named growth, national defense, the U.K.'s relationship with Europe and energy as the issues he must tackle. "To meet the challenges that our country faces, incremental change won't cut it," he told supporters, acknowledging that "some people are frustrated with me" and that he has "doubters."

He cast Nigel Farage's Reform UK and the Conservatives as parties "defined by breaking our relationship with Europe," promising closer European Union ties; in a Sunday interview he had described his government as a "10-year project of renewal" and said he was "not going to walk away," according to NPR.

The challengers

Starmer's former deputy, Angela Rayner, posted on X on Sunday that "what we are doing isn't working, and it needs to change. This may be the Labour Party's last chance," CNBC reported. Health Secretary Wes Streeting and Manchester Mayor Andy Burnham are also named by CNBC as potential challengers, though Burnham would first need a seat in the Commons. Norwich South MP Clive Lewis wrote Friday night that "The Prime Minister needs to go. That is not negotiable," NPR reported.

The backdrop is last week's local elections, when Reform UK gained more than 1,400 council seats and Labour shed more than 1,100, a result Farage in a newspaper column called the "end of the old establishment's two-party system."

On the market

Yields on benchmark 10-year gilts stood at 4.904 percent late last week after Starmer ruled out resignation, and were at 4.957 percent immediately after Monday's speech, up 4 basis points but little changed from the pre-speech level. The U.K. has the highest borrowing costs in the Group of Seven.

Kallum Pickering, chief economist at Peel Hunt, told CNBC that markets are reading Westminster as much as the macro data. "When it comes to the specific developments around near-term politics, the mere fact that bond yields declined in the U.K. on Friday but didn't elsewhere, suggests that there is still a political component to it [too]," he said, estimating that absent the political noise yields would be 10 to 15 basis points lower.

Neither a Conservative nor a Reform UK lawmaker was quoted in Monday's wire and broadcast accounts of the speech.

West told Downing Street she would begin collecting signatures Monday. The next test will be how many names she returns with, and at what yield.