U.K. Two-Year Gilts Fall for Fourth Day Amid Rate SpeculationLucy Meakin
U.K. government bonds fell for a fourth day, pushing two-year yields to the highest since 2011, as comments by the Bank of England’s David Miles fueled bets policy makers are moving closer to raising interest rates.
The pound was little changed before a report economists said will show consumer-price inflation slowed last month. Miles, an external member of the central bank’s Monetary Policy Committee, hinted that minutes of its June 5 meeting, published tomorrow, will show a move toward increasing rates from a record-low 0.5 percent, according to the London-based Times newspaper, citing an interview.
“The market is clearly primed to read into any hawkish inferences in tomorrow’s MPC Minutes, and any upside surprise in today’s CPI print is likely to put an already vulnerable short end under even more pressure,” Royal Bank of Scotland Group Plc London-based strategists Marco Brancolini and Andrew Roberts wrote in an e-mailed note, referring to money-market rates.
The two-year yield rose two basis points, or 0.02 percentage point, to 0.92 percent at 9:12 a.m. London time, the highest level since June 2011. The 2 percent security due in January 2016 fell 0.04, or 40 pence per 1,000-pound ($1,698) face amount, to 101.7. The rate climbed 19 basis points over the past three days. The 10-year yield was little changed at 2.76 percent.
Gilts returned 2.9 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries earned 2.8 percent and German securities gained 4.2 percent.
Sterling was little changed at 79.87 pence per euro after yesterday appreciating to 79.59 pence, the strongest since Oct. 1, 2012. The pound was at $1.6977 after rising to $1.7011 yesterday, the highest since Aug. 6, 2009.
The pound strengthened 9 percent in the past year, the best performer after the New Zealand dollar among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 1.6 percent and the dollar advanced 0.1 percent.