U.K. 10-year gilts advanced after European leaders cut off aid payments to Greece and said a referendum next month will determine whether the nation remains in the euro, fueling demand for securities perceived as safer.
British debt securities also advanced as the National Institute for Economic and Social Research cut its U.K. growth forecast and said there is a 50 percent chance of a recession. Longer-term bonds advanced even as the government prepared to sell as much 2 billion pounds ($3.19 billion) of bonds maturing in 2032. The pound was little changed against the dollar as the FTSE 100 Index of stocks lost 0.5 percent.
Gilts are benefiting because “the safe havens are bid and stock markets are down,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. The auction “will give us a bit of a distraction.”
The 10-year yield fell three basis points, or 0.03 percentage point, to 2.26 percent at 8:53 a.m. London time, after dropping this week to 2.17 percent, the lowest since Bloomberg started collecting the data in 1992. The 3.75 percent bond due September 2021 gained 0.235, or 2.35 pounds per 1,000- pound ($1,601) face amount, to 113.055. The two-year rate was little changed at 0.55 percent. It dropped on Nov. 1 to a record low 0.44 percent.
The pound was little changed at $1.5955 and was 0.2 percent stronger at 86.06 pence per euro.
Sterling has gained 2.1 percent in the past three months according to Bloomberg Correlation-Weighted Indexes, which track the currencies of 10 developed nations. The dollar has strengthened 6.2 percent.
To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at email@example.com
To contact the editor responsible for this story: Daniel Tilles at firstname.lastname@example.org