U.K. Gilts Fall Before Debt Sales This Week; Pound SlidesEmma Charlton and Neal Armstrong
The pound fell versus all 16 of its major peers as investors awaited publication this week of minutes of the Bank of England’s most recent policy meeting, at which officials held interest rates at a record low.
Sterling slipped from a three-week high versus the dollar after an industry report showed U.K. house prices declined this month. Details of the central bank’s November Monetary Policy Committee meeting are due on Nov. 20. Benchmark government bonds rose. The Debt Management Office will sell 3.75 billion pounds ($6 billion) of 10-year securities tomorrow and 4.75 billion pounds of a note due in 2019 on Thursday.
“The MPC has converged on a fairly neutral policy setting,” said Paul Robson, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “The market will be watching to see if there’s any disagreement in the minutes. Looking for sterling to do well this week will probably be a popular view and that might mean it surprises people and doesn’t do quite as well.”
Sterling slid 0.2 percent to 83.92 pence per euro at 5:05 p.m. London time. The pound bought $1.6112 from $1.6118 on Nov. 15. It earlier climbed to $1.6149, the highest since Oct. 28. The U.K. currency gained 0.6 percent versus the dollar last week.
At the Bank of England’s Nov. 7 policy meeting, officials kept the key rate at 0.5 percent and maintained its asset-purchase stimulus target at 375 billion pounds.
Sterling strengthened last week after the central bank signaled in its quarterly Inflation Report on Nov. 13 that interest rates may rise sooner than policy makers previously forecast. Officials said then the jobless rate is more likely than not to fall to the 7 percent threshold that will lead them to consider raising borrowing cost in the third quarter of 2015. Previously they predicted that would happen in the second quarter of 2016.
The average asking price for homes across England and Wales fell 2.4 percent this month to 246,237 pounds, London-based property-website operator Rightmove Plc said today.
The pound strengthened 2.9 percent in the past three months, the best performer after New Zealand’s dollar among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 1.1 percent, while the dollar dropped 0.5 percent.
The U.K. 10-year yield fell two basis points today, or 0.02 percentage point, to 2.72 percent. The 2.25 percent bond maturing in September 2023 rose 0.205, or 2.05 pounds per 1,000-pound face amount, to 95.975.
Five-year yields were little changed at 1.48 percent, the lowest level since Nov. 7.
The U.K. last sold 10-year gilts on Oct. 3 at an average yield of 2.742 percent, compared with 2.976 percent at a previous auction on Sept. 12.
Gilts lost 2.9 percent this year through Nov. 15, according to Bloomberg World Bond Indexes. German bonds dropped 1.1 percent and U.S. Treasuries declined 2.3 percent.