Gilts steady, sterling dips as markets assess new British finance minister

He will now have to find more money to invest in key areas while reducing the welfare bill, all while fulfilling new Prime Minister Andy Burnham's pledge to stick within the fiscal rules.

"Out of the choices he (Burnham) had, he (Healey) has some experience in Treasury, so I think that's a big positive," David Zahn, head of European fixed income at Franklin Templeton, said, adding Healey is not a far-left leaning member of the Labour Party.

"But I still think that the vision is Burnham's, and so he will have to figure out how to deliver the cash, which I don't think will be easy because they do want to spend a lot," he added.

British government bonds, known as gilts, were roughly unchanged with the 10 year bond yield a whisker higher at 5.04%. GB10YT=RR

Gilts had underperformed German Bunds on Monday after Burnham replaced Keir Starmer as prime minister, as his early remarks that he would use any flexibility within the government's fiscal rules reignited concerns about a possible loosening of fiscal policy.