Gilt Yields Slip to Week Low on Safety Bid Before Retail Sales

U.K. 10-year gilts rose, pushing yields to the lowest level in a week before a report analysts said will show retail sales fell in August, underpinning demand for the safest assets.

Sales including auto fuel slipped 0.3 percent from July, according to the median estimate of 19 economists in a Bloomberg survey. The U.K. Debt Management Office is scheduled to sell 4.5 billion pounds ($7.3 billion) of gilts due in September 2017. The pound strengthened against the euro after a separate report showed manufacturing and services industries in Europe shrank more than estimated this month.

“The market’s attention has again turned to the underlying health of the global economy,” said Brian Barry, an analyst at Investec Bank Plc in London. “As such, safe-haven assets, including gilts and bunds, are outperforming relative to riskier assets.”

The 10-year gilt yield fell four basis points, or 0.04 percentage point, to 1.80 percent at 9:22 a.m. London time. The 1.75 percent bond due in September 2022 gained 0.335, or 3.35 pounds per 1,000-pound face amount, to 99.485.

A composite index based on a survey of purchasing managers in services and manufacturing in the 17-nation euro area dropped to 45.9 in September. A reading below 50 signals contraction.

Five-year gilts also advanced for a fourth day before the auction, with the rate declining two basis points to 0.81 percent. The 1 percent 2017 securities attracted an average yield of 0.942 percent when they were last sold on July 4.

Sterling gained 0.3 percent to 80.17 pence per euro. The pound fell 0.2 percent to $1.6185, after touching $1.6164, the weakest level since Sept. 14.

The pound has appreciated 0.7 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar fell 2.6 percent and the euro rose 3 percent.

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net.

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