U.K. Yields Drop Below U.S. After Italy Downgrade; Pound Weakens

U.K. government bonds advanced, with 10-year yields falling below those of similar-maturity Treasuries for the first time in five months, as investors sought haven assets after Fitch Ratings downgraded Italy.

The spread inverted for the first time since October as the allure of U.S. debt dimmed on speculation the Federal Reserve will scale back stimulus after the unemployment rate fell to a four-year low. Gilt yields slid from a two-week high as the Bank of England began reinvesting the proceeds of its asset-purchase program. Fitch cut Italy’s rating one level citing political instability that has sent the nation’s bond yields higher. The pound dropped to the least since June 2010 against the dollar.