U.K. Gilts Advance Before Bank of England Inflation Report

U.K. government bonds rose before the Bank of England’s latest growth and inflation projections this week amid speculation the report will provide room for further asset purchases to boost growth.

Ten-year gilt yields fell for a second day before European finance chiefs meet to discuss a program to maintain Greek solvency. The pound reached a two-month low against the dollar as investors await the Bank of England’s quarterly report, due on Nov. 14. The central bank refrained from adding more stimulus at its most recent policy meeting, minutes from which are due next week.

“Despite the Bank of England’s pause, we think another round of quantitative easing can’t be ruled out especially if the economic outlook deteriorates,” said Nick Stamenkovic, a fixed-income strategist at RIA Capital Markets Ltd. in Edinburgh. “That possibility and the renewed concern about Greece will underpin high-quality government bonds including U.K. gilts.”

The 10-year yield fell two basis points, or 0.02 percentage point, to 1.72 percent at 10.38 a.m. London time. The 1.75 percent bond due September 2022 rose 0.13, or 1.30 pounds per 1,000-pound ($1,591) face amount, to 100.27. Two-year yields slid one basis point, to 0.24 percent.

Gains may be limited before a report tomorrow that will show consumer prices rose 2.4 percent in October from the year before, according to the median estimate of 36 economists in a Bloomberg News survey. Retail prices also climbed 0.2 percent, according to another survey.

Pound-Dollar

The pound was little changed at $1.5904 after touching $1.5880, the weakest since level since Sept. 5. Sterling was at 79.94 pence per euro.

The U.K. currency has gained 1.2 percent this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro fell 3.4 percent and the dollar dropped 1.3 percent.

Gilts returned 3.4 percent this year through Nov. 9, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 4 percent and U.S. Treasuries earned 2.7 percent.

To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net

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

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