U.K. government bonds fell, pushing 10-year gilt yields up from near a nine-month low, as data showed consumer confidence increased to a nine-year high this month.
The pound strengthened against all but one of its 16 major peers after the British Chambers of Commerce today raised its growth forecast. Bank of England and European Central Bank policy makers are set to decide policy in separate meetings next week, when jobs data from the U.S., and purchasing managers reports are also expected.
“Whether it’s the GfK or those BCC forecast upgrades, it all adds to a little bit more pressure” on gilts, said Marc Ostwald, a strategist at Monument Securities Ltd. in London. “Longer-dated yields have probably bottomed out at this kind of level. But obviously it’s a big event risk next week with ECB and U.S. payrolls and all the PMIs around the world.”
The yield on 10-year gilts rose three basis points, or 0.03 percentage point, to 2.57 percent at 4:34 p.m. London time after dropping to 2.52 percent yesterday, the lowest since Aug. 13. The 2.25 percent security due September 2023 fell 0.22, or 2.20 pounds per 1,000-pound ($1,676) face amount, to 97.385. The yield dropped nine-basis points in the month, the biggest since January.
GfK NOP Ltd. said its sentiment index jumped to zero from minus-three points, the first time there hasn’t been a negative reading since April 2005. The BCC separately said it sees gross domestic product expanding 3.1 percent this year versus a previous estimate of 2.8 percent.
Gilts returned 4.1 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries rose 3.5 percent and German securities gained 4.2 percent.
The pound increased 0.3 percent to $1.6766, paring its monthly decline to 0.6 percent, the biggest drop versus the dollar since January. Sterling snapped a five-day slide versus the euro to trade at 81.36 pence.
The pound has risen 9.6 percent in the past year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, as a strengthening U.K. economy boosted speculation the Bank of England will raise rates sooner than policy makers anticipated. The euro gained 3.5 percent, while the dollar weakened 1.5 percent.