Prices higher and yields lower on UK bonds
by Brian Turner
Prices were higher and yields lower on UK gilts in early afternoon trading in London on Thursday on slower than expected first-quarter economic growth.
Household spending grew by only 0.1 percent while house prices were down by 0.2 percent.
The 2-year gilt lost 5.4 basis points to yield 4.056 percent and the 10-year gilt dropped 4.3 basis points to a yield of 4.172 percent.
In longer-dated issues, the 30-year gilt fell 3.6 basis points to a yield of 4.207 percent, while the new 50-year gilt declined by 5 basis points to yield 4.122 percent.
Another factor in the rise of gilt prices was continuing speculation that the Bank of England will cut UK interest rates soon.
August is the most talked-about time for the move, but some analysts believe a cut in rates could come as early as July.
Meanwhile, in the eurozone, the 2-year Schatz dropped 2.1 basis points to yield 2.207 percent, while the 10-year Bund fell 5.5 basis points to a yield of 3.319 percent.
Speculation continues about an interest rate cut by the European Central Bank even though officials of the ECB continue to insist that rates are “appropriate” at their current 2 percent.
Other bond markets seemed to be waiting for the policy statement that would be issued later in the day by the US Federal Reserve along with its expected interest rate increase, hoping that the statement would provide further guidance on where rates might go in the future.
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