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Gilts Extend Weekly Advance on Bets U.S. Will Maintain Stimulus

U.K. government bonds extended a third weekly gain as a U.S. report showing consumer confidence dropped this month boosted demand for fixed-income assets.

Benchmark 10-year gilt yields dropped toward the lowest level in two months as the data added to speculation the Federal Reserve will maintain asset purchases to keep borrowing costs low. U.K. bonds have advanced for three of the past four days after a U.S. report this week showed American employers added fewer jobs last month than economists forecast. The pound weakened against most of its major counterparts.

“We’re going where Treasuries lead us,” said John Wraith, a fixed-income strategist at Bank of America Corp. in London. “The situation in the U.S. remains the biggest driver of longer-term yields and sentiment. The data in the U.K. has settled down a bit. The number today was OK, but not as strong as the PMIs had suggested,” he said, referring to purchasing managers surveys released earlier this month.

The benchmark 10-year gilt yield fell two basis points, or 0.02 percentage point, to 2.61 percent at 4:23 p.m. London time, having dropped 11 basis points this week. The 2.25 percent bond due in September 2023 rose 0.18, or 1.80 pounds per 1,000-pound face amount, to 96.90.

The Thomson Reuters/University of Michigan final consumer sentiment index dropped to 73.2, the weakest this year, from 77.5 in September. The median estimate in a Bloomberg survey was for a decline to 75.

Gilts lost 2.4 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries fell 1.9 percent and German securities dropped 1.5 percent.

The pound dropped 0.2 percent to $1.6166 and weakened 0.2 percent to 85.36 pence per euro.

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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