Gilt Yields Fall to Seven-Month Low on U.S. Jobs; Pound AdvancesDavid Goodman
U.K. government bonds rose, with 10-year yields falling to the lowest since September, as a U.S. report showing employers added fewer jobs than economists forecast boosted demand for Britain’s fixed-income assets.
The pound rose to a six-week high against the dollar after the U.S. Labor Department report added to signs growth in the world’s biggest economy is slowing. Benchmark gilts headed for a fourth weekly gain, the longest run since November, amid concern financial turmoil in Cyprus and a political stalemate in Italy will re-ignite Europe’s debt crisis.
“There are still risks out there and investors are still interested in safe-haven trades,” said Peter Dixon, an economist at Commerzbank AG in London. “Cyprus has had a big impact on the markets. Gilts seem massively overvalued.”
The 10-year gilt yield fell eight basis points, or 0.08 percentage point, to 1.63 percent at 4:34 p.m. London time, the lowest since Sept. 5. The 1.75 percent bond due in September 2022 rose 0.72, or 7.20 pounds per 1,000-pound face amount, to 101.04. The yield has declined 14 basis points this week.
U.S. employers added 88,000 workers in March, the least in nine months, after a revised 268,000 gain in February, the Labor Department said. The median forecast of 87 economists surveyed by Bloomberg was for 190,000. The jobless rate fell to 7.6 percent from 7.7 percent.
The pound appreciated for a third day against the greenback as investors bet the U.S. payroll data means the Federal Reserve will maintain its policy of asset purchases to push down borrowing costs.
Sterling gained 0.7 percent to $1.5343 after rising to $1.5363, the strongest level since Feb. 20. The U.K. currency was little changed at 84.93 pence per euro.
The Bank of England yesterday maintained its asset-purchase target at 375 billion pounds and kept its benchmark interest rate at a record-low 0.5 percent.
The pound has still weakened 4.1 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar has gained 2.3 percent and the euro rose 0.9 percent.
EasyJet Plc, Europe’s second-largest discount carrier, said that the depreciating pound is affecting its earnings. The company, which today announced a pretax loss for the six months ended March in the range of 60 million pounds to 65 million pounds, said a weaker pound had an “adverse impact” of 30 million pounds to 35 million pounds in the period.
Gilts returned 1.4 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 0.7 percent and Treasuries rose 0.4 percent.