UK Gilts Fall as Stock Gains Boost Risk Appetite Before Sale
Jan. 3 (Bloomberg) -- U.K. gilts declined after beating all 26 major government bond markets tracked by Bloomberg last year as gains in stocks and commodities damped demand for a haven.
Ten-year yields rose before the Debt Management Office sells 3.75 billion pounds ($5.8 billion) of notes maturing in 2017 tomorrow. Gilts also fell after a report showed U.K. manufacturing shrank less than economists predicted in December. The Stoxx Europe 600 Index of shares gained 1.6 percent while the FTSE 100 Index rose 2.3 percent and copper prices climbed after a gauge of manufacturing in China rose. Sterling strengthened versus the dollar.
“Strong gains in commodities and stocks on the back of good news from Asia reduced demand for top quality government bonds including gilts,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “Risk appetite may improve in the near term, but longer-term I expect the euro-debt crisis to continue to provide support for gilts.”
The 10-year gilt yield advanced six basis points, or 0.06 percentage point, to 2.03 percent at 5:05 p.m. London time. The 3.75 percent bond due September 2021 fell 0.525, or 5.25 pounds per 1,000-pound ($1,566) face amount, to 115.01.
Two-year yields rose three basis points to 0.36 percent, after falling to an all-time low 0.271 percent on Dec. 30.
Factory Output
Gilts completed a second year of gains in 2011, returning 17 percent and outperforming German bunds and U.S. Treasuries as investors sought the safest assets amid sovereign-debt turmoil in the euro region.
The pound rose 0.9 percent to $1.5659 and climbed 0.7 percent to 120.123 yen. It was little changed against the euro at 83.39 pence.
A gauge of factory output based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply rose to 49.6 from a revised 47.7 in November, the group said today. The median forecast of 19 economists in a Bloomberg News survey was for a drop to 47.3 from an initially reported 47.6 in November. A level below 50 indicates contraction.
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3 (Bloomberg) -- UK gilts declined after beating all 26 major government bond markets tracked by Bloomberg last year as gains in stocks and commodities damped demand for a haven. Ten-year yields rose before the Debt Management Office sells 3.75 billion
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