U.K. PM Burnham promises new economic model

• Britain has become a test case for the return of the bond vigilantes, with investors showing far less tolerance for governments that rely heavily on borrowing.

What they're saying: "We will make this moment a circuit breaker for Britain, bringing forward the biggest changes in the last 40 years — a new political model and a new economic model," Burnham said outside 10 Downing Street on Monday morning.

• He pledged to "build a new economy where we put life's essentials back under stronger public control to make them affordable to you again, re-industrializing Britain, using public procurement to back British industry."

What to watch: Burnham will unveil cost-of-living measures on Tuesday — including plans to pay for it — and a broader 10-year economic plan later this year.

The bottom line: Burnham has promised a bigger role for the state while pledging to stick to Britain's fiscal rules and avoid raising the country's biggest taxes — a difficult balancing act at a time when borrowing costs remain elevated and investors are scrutinizing governments' finances more closely than they did a decade ago.

• "Burnham's bold ambition toward everything from social housing investment to nationalization is constrained by a commitment to stick to the fiscal rules and not raise the biggest taxes," ING economist James Smith wrote in a note Monday morning.

• The yield on Britain's 10-year gilt was about 5% on Monday, some 1.5 percentage points above the level before the Truss mini-budget fiasco — reflecting both higher global interest rates and investors' heightened focus on fiscal credibility.