Gilts Advance, Pound Gains Third Day Against Euro as Investors Seek Haven

The pound strengthened for a third day against the euro as speculation European leaders aren’t doing enough to resolve the region’s debt crisis spurred demand for assets outside the single-currency area.

Sterling appreciated to a nine-month high versus the euro after a U.K. report showed claims for jobless benefits increased less in November than economists forecast. Gilts gained as stock losses boosted investor appetite for the safety of the nation’s government debt.

“The pound still trades as a semi-safe haven,” said Elsa Lignos, a currency strategist at RBC Europe Ltd. in London. “On days like today, when risk appetite is under pressure, the pound will benefit.”

The U.K. currency appreciated 0.3 percent to 84 pence per euro at 5 p.m. London time after rising to 83.73, the strongest since Feb. 18. Sterling fell 0.2 percent to $1.5442, and declined 0.1 percent to 120.57 yen.

Jobless-benefit claims rose 3,000 to 1.6 million, the the Office for National Statistics said today in London. Economists predicted an increase of 13,700, according to a Bloomberg News survey. Unemployment as measured by International Labor Organization standards rose by 128,000 to 2.64 million, the office said.

Sterling has strengthened 2.6 percent in the past three months, the second-best performer among 10 developed-nation currencies after the dollar, according to Bloomberg Correlation- Weighted Indexes.

Gilts Gain

The 10-year gilt yield dropped three basis points to 2.09 percent. The 3.75 percent bond due September 2021 rose 0.305, or 3.05 pounds per 1,000-pound face amount, to 114.51. Two-year rates fell three basis points to 0.34 percent.

The FTSE Index of U.K. shares dropped the most in four weeks, declining 2.3 percent

The U.K. sold 3 billion pounds of 4 percent gilts due March 2022 at an average yield of 2.21 percent, the Debt Management Office said today. State Street Bank Europe Ltd. resigned as a gilt-edged market maker for U.K. government bonds with immediate effect, the office also said.

Gilts have returned 0.3 percent this month, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt gained 1.9 percent and Treasuries added 0.5, the indexes show.

To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

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

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