Gilts Climb a 2nd Day After U.S. Retail Sales as Ministers Meet

U.K. government bonds advanced for a second day after a report showed retail sales in the U.S. unexpectedly fell in March by the most in nine months, boosting demand for British assets as a refuge.

The pound slipped from a seven-week high versus the dollar even after an industry report showed U.K. house prices climbed to a five-year high last month. German bunds advanced as a Cypriot government official said the nation’s president is discussing a possible aid boost. Germany’s Handelsblatt newspaper reported talks among euro-area finance ministers in Dublin on direct bank recapitalization from Europe’s bailout fund is “going in circles.”

“Core yields are attracting support,” said Jamie Searle, a fixed-income strategist at Citigroup Inc. in London. “Gilts are facing strong bearish risks, but this is being offset by safe-haven demand.”

Benchmark 10-year gilt yields fell four basis points, or 0.04 percentage point, to 1.73 percent at 4:39 p.m. London time. The 1.75 percent bond due September 2022 rose 0.34, or 3.40 pounds per 1,000-pound ($1,536) face amount, to 100.19. The rate has climbed 10 basis points since April 5, the first weekly increase since the five days through March 8.

German 10-year yields slid four basis points to 1.26 percent.

U.S. retail sales dropped 0.4 percent, the biggest decline since June, following a 1 percent gain in February, Commerce Department figures showed today in Washington. The median forecast of 85 economists surveyed by Bloomberg called for an unchanged reading.

Increasing Funds

What Cypriot President Nicos Anastasiades “is discussing with European officials is the possibility of increasing European funds, for growth and social cohesion,” government spokesman Christos Stylianides said in a statement e-mailed from Nicosia.

Euro-area ministers endorsed an extension to rescue loans for Ireland and Portugal, while all 27 European Union members will discuss banking regulation.

The average cost of a home in England and Wales gained 0.2 percent from February to 230,078 pounds, Acadametrics Ltd. and LSL Property Services Plc (LSL) said today. Excluding London, prices fell 0.1 percent.

Sterling dropped 0.2 percent to $1.5359 after rising to $1.5412 yesterday, the highest since Feb. 20. It has advanced 0.2 percent this week. The pound was little changed at 85.24 pence per euro after touching 84.90, the strongest level since April 8.

Currency Indexes

The pound has declined 4.4 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar rose 1.8 percent and the euro strengthened 1 percent.

The Debt Management Office is scheduled to sell 2.25 billion pounds of gilts due in 2044 on April 18, while a report on April 16 will show the annual inflation rate held at 2.8 percent in March, according to the median estimate of 36 analysts in a Bloomberg News survey.

The debt office said on its website today it will auction index-linked gilts due in 2062 in a so-called mini-tender operation on April 30. Further details will be announced on April 19, it said.

Gilts returned 1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 0.5 percent and Treasuries rose 0.3 percent.

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net

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

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