Safeguarding minister Jess Phillips resigned from Keir Starmer's government on Tuesday, the second minister to quit in a matter of hours and the clearest signal yet that the British prime minister's leadership crisis has spilled into the gilt market. By Tuesday morning, U.K. government borrowing costs had surged to their highest level since 2008, with the 30-year yield at 5.67 percent and the 10-year at 5 percent.

The twin departures and the bond move recast a story that began Monday, when Starmer's set-piece speech failed to settle his party. Eurasia Group on Monday evening raised the probability that Starmer is ousted this year to 80 percent, from 65 percent, and Mizuho's Jordan Rochester told clients Tuesday that "For many, the writing is on the wall at this stage, it s just a matter of how quickly the exit happens."

What shifted Tuesday

Junior housing minister Miatta Fahnbulleh resigned first Tuesday, urging Starmer in a post on X to "do the right thing for the country and the Party and set a timetable for an orderly transition." Fahnbulleh added: "The public does not believe that you can lead this change – and nor do I." Phillips, the safeguarding minister, followed some hours later, according to Sky News reporting cited by CNBC.

As of Monday evening, 77 Labour MPs were publicly calling on Starmer to quit, with Home Secretary Shabana Mahmood the most senior name on the list. Al Jazeera put the figure at roughly 80 by Tuesday. The Telegraph reported that six of the 22 cabinet ministers were expected to tell the prime minister to go.

Starmer held a crunch cabinet meeting Tuesday morning. His office issued a statement insisting he would not resign: "The Labour Party has a process for challenging a leader and that has not been triggered." The statement added that "The country expects us to get on with governing."

On the Street

The gilt move was the market's verdict on the political math. Deutsche Bank strategists wrote Tuesday that the jump in 10- and 30-year yields reflected concern that a new Labour leader "may face pressure to ease the fiscal rules and raise gilt issuance," and called the cabinet meeting a session that "could be a big day in determining Starmer s future."

Eurasia Group analysts led by Mujtaba Rahman put the most likely path at an MP-forced leadership election by September, at 35 percent probability, with a 25 percent chance of an orderly transition and a 20 percent chance of an immediate contest. "Starmer s attempt to quell a rebellion against his leadership has failed," they wrote, adding that "Although he may remain a few more months in Downing Street, he is still fighting for his political life after his make-or-break speech earlier Monday did not include enough new policies to satisfy many Labour MPs."

Named contenders include Manchester Mayor Andy Burnham, who would need to return to the Commons to stand; former deputy Angela Rayner; and Health Secretary Wes Streeting. None has formally moved against Starmer. Mizuho's Rochester noted the historical stakes: "If Starmer goes, it will make history. No sitting Labour PM yet has ever faced a leadership challenge or been removed by his party."

The counterpoint

Starmer's own case, made in Monday's speech and repeated in Tuesday's statement, is that swapping leaders mid-term is the destabilizing event, not the cure. He acknowledged having "doubters" and pledged to "face up to the big challenges" on national security, immigration and Europe. His office argued the past 48 hours had themselves carried "a real economic cost for our country and for families," an implicit warning to Labour MPs that a contest now would worsen the gilt selloff rather than relieve it. No right-leaning outlet appeared in today's body sources; the dossier draws on CNBC, NBC News and Al Jazeera.

The next test is whether Tuesday's cabinet meeting produces resignations from the top table or a public show of unity. Eurasia Group's base case puts a leadership election by September.