Gilt Yields Reach Week Low as U.K. Sells Debt Before BOE Minutes

U.K. 10-year bond yields fell to the lowest level in more than a week as investors awaited publication tomorrow of minutes of the Bank of England’s November meeting, which will show how policy makers voted.

Benchmark gilts swung between gains and losses after the Debt Management Office sold 3.75 billion pounds ($6.04 billion) of 10-year securities in the first of two sales this week. The pound was little changed versus the dollar after the Organisation for Economic Co-operation and Development said Britain’s property market may be facing a bubble, even as it raised its U.K. growth forecasts. The central bank’s Monetary Policy Committee kept interest rates at a record low on Nov. 7.

“We have the MPC minutes tomorrow where we will see what the policy discussion was like,” said Marc Ostwald, a strategist at Monument Securities Ltd. in London. “The auction was taken down easily and that’s given the market a bit of a boost. Gilts have a generally healthy bid to them. The focus now turns to the next auction on Thursday.”

The U.K. 10-year yield was little changed at 2.72 percent as of 4:26 p.m. London time, having dropped eight basis points, or 0.08 percentage point, in the previous five days. It earlier slid to 2.70 percent, the lowest since Nov. 8. The price of the 2.25 percent bond maturing in September 2023 was at 95.98.

The U.K. sold the securities at an average yield of 2.732 percent, compared with 2.742 percent at an auction on Oct. 3.

Today’s sale will be followed by an auction of 4.75 billion pounds of debt securities due in 2019 on Nov. 21.

Key Rate

At the Bank of England’s most recent meeting, officials kept the key rate at 0.5 percent and maintained their asset-purchase stimulus target at 375 billion pounds.

The nation’s jobless rate is more likely than not to reach the 7 percent threshold that may prompt policy makers to consider increasing interest rates in the third quarter of 2015, the central bank said last week, having previously stated that it didn’t see that happening until the second quarter of 2016.

Gilts lost 2.7 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1 percent and U.S. Treasuries declined 2.1 percent.

Sterling fell 0.2 percent to 84 pence per euro. The pound bought $1.6106 after reaching $1.6149 yesterday, the highest since Oct. 28.

“We are very bullish on the pound,” Steven Saywell, global head of foreign-exchange strategy at BNP Paribas SA in London, said in a Bloomberg Television interview today. “We’re coming from a point where the pound is very cheap.”

Britain’s currency strengthened 2.7 percent in the past three months, the best performer after the New Zealand and Australian dollars among 10 developed-market counterparts tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 1 percent, while the greenback dropped 0.6 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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