Gilts Decline After Report Shows House Prices Rose in September

U.K. government bonds declined after an industry report showed a gauge of house prices rose to the highest level in more than a decade last month.

A gauge by the Royal Institution of Chartered Surveyors increased to 54, the highest since June 2002, from 41 in August, the London-based group said in a report, citing a poll of property surveyors. The Debt Management Office is scheduled to sell 1.75 billion pounds ($2.81 billion) of inflation-linked bonds today. The pound was little changed.

The benchmark 10-year gilt yield climbed two basis points, or 0.02 percentage point, to 2.73 percent at 8:10 a.m. in London. The 2.25 percent bond due in September 2023 fell 0.155, or 1.55 pounds per 1,000-pound face amount, to 95.895.

Gilts handed investors a loss of 2.8 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1.7 percent and U.S. Treasuries declined 2.4 percent.

The Bank of England will keep its benchmark rate at 0.5 percent and its asset-purchase stimulus target at 375 billion pounds when it announces its policy decision on Oct. 10, according to Bloomberg News surveys of economists.

The pound fell 0.1 percent to $1.6075 after rising to $1.6260 on Oct. 1, the strongest since Jan. 2. The U.K. currency was at 84.40 pence per euro.

Sterling jumped 4.4 percent versus the dollar in September as improving economic data prompted investors to increase bets the central bank would raise borrowing costs earlier than it had predicted. Services activity expanded in September and house prices climbed, reports showed last week.

The pound advanced 5.9 percent in the past six months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar fell 0.1 percent and the euro rose 4.7 percent.

To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net

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

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