RBS Says More Bank of England Bond Buying Likely, `Stay Long' U.K. Gilts

Royal Bank of Scotland Group Plc said the Bank of England will probably expand its asset-purchase facility this week to boost the economy and advised investors to own U.K. government bonds.

“We are bruised but unbowed in our bullish call for the gilt market,” Andy Chaytor, a London-based rates strategist, wrote in a report dated Oct. 31. “We expect gilt yields to fall.”

The yield on the 10-year gilt rose 12 basis points to 3.07 percent last week after data showed gross domestic product increased 0.8 percent in the third quarter, double the projection of analysts in a Bloomberg survey.

Central bank policy makers may announce a fresh 50 billion pounds ($80 billion) of purchases on Nov. 4, Chaytor wrote. Gilts offer “great risk-reward,” he said. They have moved back to “not-much-chance-of-quantitative-easing-happening levels,” and investors should “stay long,” he said.

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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