Gilts declined, pushing the 10-year yield to a three-week high, after European Union finance ministers eased the terms on emergency aid for Greece, damping demand for the safety of U.K. government debt.
The pound strengthened to highest in three weeks against the dollar before a report that analysts said will confirm the U.K. economy exited a double-dip recession in the third quarter. Gross domestic product rose 1 percent in the three months ended September, according to the median forecast of 33 economists in a Bloomberg News survey before a second reading of the data is published at 9:30 a.m. in London.
“The immediate reaction has obviously been driven by events in Europe,” said Brian Barry, an analyst at Investec Bank Plc in London. “Whether that’ll continue or whether the focus will turn to the state of the underlying domestic economy will depend on what, if any, revision we see to the GDP number.”
The 10-year gilt yield rose two basis points, or 0.02 percentage point, to 1.86 percent at 9:23 a.m. London time. It earlier advanced as much as five basis points to 1.88 percent, the most since Nov. 2. The 1.75 percent bond due in September 2022 fell 0.19, or 1.90 pounds per 1,000-pound ($1,603) face amount, to 99.025.
Bank of England Governor Mervyn King and policy makers Paul Fisher, Martin Weale and Ben Broadbent speak before lawmakers today. Bank of Canada Governor Mark Carney was appointed to replace King as the next head of the BOE yesterday.
Gilts returned 2.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 3.6 percent and U.S. Treasuries earned 2.5 percent.
The pound was little changed at $1.6030, after rising to 1.6052, the strongest level since Nov. 2. Sterling was at 80.94 pence per euro, after falling to 81.14 pence, the weakest since Oct. 24.
Sterling has gained 1.1 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro declined 2.2 percent and the dollar fell 2.3 percent.