IRAN: Iran Sticks To Demands

Gilts sell off after The Times reports that Health Secretary Streeting has told allies that he is preparing to resign and trigger a leadership contest as soon as tomorrow

• Still, yields have not challenged yesterday’s highs, seemingly on the fact that Streeting’s challenge doesn’t represent the greatest fiscal risk amongst likely candidates (the more left leaning Rayner or Burnham would prove move problematic for gilts, but both have at least some short-term hurdles to overcome before mounting a formal challenge).
• Yesterday’s cycle/multi-year highs in long end gilt yields continue to present the initial bearish targets.
• Long end UK swap spreads also fail to retest yesterday’s lows.

Headlines via Bloomberg

• "*MERZ GOVT TO SEEK 'SUBSTANTIAL RESULTS' BY SUMMER BREAK: SPD"
• "*MERZ'S COALITION SETS OUT ROAD MAP FOR BIG REFORMS BY JULY: SPD"
• "*GERMAN SPD CAUCUS LEADER MIERSCH LAYS OUT PLAN IN LETTER"

Follows yesterday's coalition meeting, where members agreed to press ahead with reforms in the coming weeks but produced few concrete agreements. Bloomberg reported that:

• "Merz’s Christian Democratic-led bloc and the Social Democrats set out a working process to coordinate and implement a legislative agenda, according to a government official familiar with the agreement. "
• "No timeline was given, though the partners committed to finalizing the 2027 budget without reserve funding and holding carbon prices steady, the official said early Wednesday on condition of anonymity in line with government protocol. "

Aubrey Allegretti at The Times: "Wes Streeting has told allies that he is preparing to resign and trigger a leadership contest as soon as tomorrow. The health secretary confronted Sir Keir Starmer this morning during a meeting ahead of the King’s Speech that lasted just 16 minutes over the turmoil engulfing the Labour Party. Allies of Streeting who have spoken to him directly said that he has made clear that he is “going to go for it”. They said that he is likely to resign on Thursday and mount a formal challenge for the leadership. One Streeting ally who has spoken to him said: “He is going to go for it. He’s going tomorrow.” 

• Continued: "Discussions have also been held to prepare for MPs to sign Streeting’s nomination papers, according to one of those with knowledge of the plans. Another who has spoken to him said that claims by Starmer’s allies that he has “bottled it” are wide of the mark and that he made clear in private that he will make a bid for the leadership. A third senior source organising for Streeting said: “If they [Starmer’s supporters] think this is over, they’re going to be disappointed. I’m expecting a move before the end of the week.” A spokesman for Streeting said: “Wes is the Health Secretary, he is proud of his record of falling waiting lists and a recovering NHS. He is not planning to say anything following his meeting with the Prime Minister that might distract from the King’s Speech.”
• As noted previously, an immediate contest would restrict Andy Burnham's ability to run, and potentially Angela Rayner's, depending on the progress of her tax investigation.
• Starmer would be on the ballot in a leadership challenge without requiring any MP signatures. The party's National Executive Committee (stacked with Starmer appointees) would set out the timetable. There would be a one-member-one-vote election. On the presumption that there are only two candidates, the individual with the most votes would win. In the event of more than two runners, if no candidate receives a majority the lowest placed candidate is removed and their additional preference votes redistributed until a candidate holds a majority.