British gilt yields rise, sterling dips as Burnham becomes UK prime minister

LONDON, July 20 (Reuters) - Benchmark British borrowing costs rose and sterling dipped on Monday as investors fretted over whether Andy Burnham's early remarks on becoming prime minister suggested he would adopt a looser fiscal policy. Burnham later on Monday named former defence secretary John Healey as finance minister, causing the pound to recover marginally along with bond futures. Britain's seventh prime minister in a decade faces an array of challenges in his new role -- from a sluggish economy to worries about fiscal discipline and the fallout from the Iran war. Burnham said on Monday he would stick to the previous government's fiscal rules although he would use any flexibility within them. Prices of British government bonds, or gilts, extended their earlier fall after his remarks, sending Britain's benchmark 10-year gilt yield up 8 basis points on the day to 5.04%. 'We had a bit of a reaction from the market, and I think it was this headline about him (Burnham) being willing to use any flexibility within the fiscal rules,' Evelyne Gomez-Liechti, multi-asset strategist at Mizuho, said. Britain's 30-year yield rose 9 bps to 5.75%, its highest in two months. Sterling dipped after Burnham's remarks and then marginally rebounded after the announcement of Healey as chancellor a few hours later. Sterling was last down 0.17% on the dollar at $1.3429. 'I can't believe we've gone from this relatively long period of stable leadership to this rapid change of prime minister that gives no one that certainty for the longer term,' said Oliver Blackbourn, multi-asset manager at Janus Henderson.