U.K. government bonds fell for the first time in four days after an industry report showed home sellers raised asking prices, reducing the need for the Bank of England to buy debt to keep borrowing costs low.
Longer maturity gilts led losses as economists said government data tomorrow will show annual inflation accelerated last month, reducing the attraction of fixed-income securities. Government bonds also declined as Asian and European stocks advanced. The pound strengthened to a four-month high against the dollar.
“There’s various signs around that sentiment is picking up in the U.K,” said John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London. “We’re seeing domestically some of the best numbers that we’ve seen for some time. I can see why at least part of the move in terms of the spike higher in yields over the past month has happened.”
The benchmark 10-year yield rose two basis points, or 0.02 percentage point, to 2.08 percent at 4:28 p.m. London time, having increased 20 basis points in the past month. The 1.75 percent bond due September 2022 fell 0.16, or 1.60 pounds per 1,000-pound ($1,574) face amount, to 97.24. The 30-year yield climbed four basis points to 3.41 percent.
Prices sought by British homeowners rose 1.2 percent in June, pushing average values above 250,000 pounds for the first time, property-website operator Rightmove said. Annual consumer-price inflation quickened to 2.6 percent in May from 2.4 percent the previous month, according to a Bloomberg survey before the Office for National Statistics releases the data tomorrow.
The Stoxx Europe 600 Index of shares rose 0.8 percent and the Standard & Poor’s 500 Index climbed 1.1 percent.
Gilts handed investors a loss of 1.3 percent this year through June 14, according to Bloomberg World Bond Indexes. German bonds dropped 0.7 percent and Treasuries declined 1 percent, the indexes show.
The pound was little changed at $1.5701 after advancing to $1.5752, the strongest since Feb. 11. The U.K. currency was also little changed at 84.91 pence per euro.
U.K. retail sales increased in April, while an industry gauge of manufacturing orders improved in June, according to separate Bloomberg surveys of economists before the reports are released on June 20.
This week’s data “have the capacity to boost the pound a little further,” Jane Foley, senior foreign-exchange strategist at Rabobank International in London, wrote in a note to clients. The inflation report may give “a short-term boost to the pound” because investors will conclude that the chances of more quantitative easing will recede, she wrote.
Sterling has strengthened 4.6 percent in the past three months, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 2.4 percent and the dollar fell 0.3 percent.