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Tuesday 06th of January 2009
May 9, 2005

UK economy news raises gilts


by Brian Turner
UK economy news raises gilts

The Bank of England on Monday took a decision to leave its main interest rate at 4.75 percent for the ninth month in a row.

This, plus a weaker than expected report on manufacturing, sent gilt prices higher in the UK. Yields on the two-year gilt rose 4.4 basis points at midday, to 4.483 percent, while yields on the 10-year gilt advanced 2.2 basis points to 4.571 percent.

These higher gilt prices and a healthy U.S. labor report on Friday sent prices up and yields down in the European government bond market. The two-year Schatz yielded 2.249 percent and yields on the 10-year Bund were at 3.429 percent.

The manufacturing report that caused the movement in the UK market showed that manufacturing output was down in March by 1.6 percent compared with the previous month. This was the third monthly fall in a row and more of a drop than had been expected.

Industrial production, accounting for around 20 percent of the gross domestic product, was down 1.2 percent from the previous month when it was in fact expected to go up in March.

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