Gilts Rise for 4th Week as Faltering Recovery Boosts Safety Bid

U.K. gilts advanced for a fourth week as signs the global economic recovery is faltering and Europe’s debt crisis is deepening fueled demand for the safest fixed-income assets.

Ten-year bond yields dropped to the lowest since February after a U.S. report showed more Americans filed for jobless benefits than economists forecast. Gilts rose yesterday as data showed Spanish banks’ borrowings from the European Central Bank jumped by almost 50 percent in March, fueling speculation the regional debt crisis is getting worse. The pound weakened against the yen.

“Risk aversion has clearly picked up and fears about the fiscal position in Spain have been rekindled,” said Nick Stamenkovic, a strategist in Edinburgh at RIA Capital Markets Ltd., a broker for banks. “Until we see signs of either an improvement in the fiscal position in Europe or we start to see growth picking up, then investors are going to remain wary. As a result safe-haven flows will persist for gilts near term.”

The yield on the benchmark 10-year gilt fell 12 basis points, or 0.12 percentage point this week, to 2.04 percent at 5 p.m. London time yesterday. The 4 percent bond due in March 2022 gained 1.1, or 11 pounds per 1,000-pound ($1,598) face amount, to 117.46. The four weeks of price gains is the longest since the period through Dec. 30.

China Slows

China’s economic growth slowed to 8.1 percent in the first quarter, the least since the middle of 2009, the National Bureau of Statistics said in Beijing yesterday. A U.S. report on April 6 showed payrolls increased by the smallest amount in five months in March.

Spain’s 10-year bond yield jumped 22 basis points this week to 5.98 percent. Average net borrowings from the ECB by Spanish banks climbed to 227.6 billion euros ($298 billion) last month from 152.4 billion euros in February, the Bank of Spain said.

Economist predict a U.K. report on April 17 will show consumer prices rose 3.4 percent in March from a year earlier, staying above the central bank’s 2 percent target.

Gilts have returned 1 percent this month, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds rose 0.5 percent, and Spanish bonds dropped 2.5 percent.

The pound dropped 0.9 percent against Japan’s currency this week to 128.35 yen. Sterling declined 0.1 percent to $1.5854, and was little changed at 83.51 pence per euro.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE