U.K. Bonds Little Changed as Data Set to Show Resilient Economy

U.K. government bonds were little changed before reports this week that may confirm Britain’s economy is withstanding stagnation in the euro area.

Declines earlier today pushed the 10-year gilt yield to the highest level in almost two weeks. Households can withstand a gradual increase in interest rates, the Bank of England said, citing a survey of British consumers it commissioned. The pound rose from a 15-month low versus the dollar today reached after a report last week showed U.S. job creation in November beat analysts’ predictions, supporting the case for the Federal Reserve to consider raising borrowing costs.

“We’ve had the quarterly bulletin overnight which suggested that the Bank of England is more comfortable about hiking rates and the effect on mortgage holders is not going to be too dramatic,” said Vatsala Datta, a U.K. rates strategist at Royal Bank of Canada in London.

Benchmark 10-year gilt yields were at 2.01 percent as of 12:18 p.m. London time, after rising nine basis points, or 0.09 percentage point, last week, the most since the period ended Sept. 5. The rate touched 2.05 percent earlier, the highest since Nov. 25. The price of the 2.75 percent bond due in September 2024 was at 106.565 percent of face value.

Reports tomorrow will show U.K. industrial and manufacturing production climbed in October, according to Bloomberg surveys of economists. Data due on Dec. 12 will show construction output increased for a second month in October, according to the median estimate in a separate Bloomberg survey of analysts.

Sterling climbed 0.2 percent to $1.5617 after falling to $1.5542, the weakest level since Sept. 3, 2013. The pound strengthened 0.4 percent to 78.53 pence per euro.

Gilts returned 8.1 percent in the six months through Dec. 5, the best performer among developed-nation sovereign debt markets tracked by Bloomberg World Bond Indexes. That compares with 4.4 percent for German securities, the euro area’s benchmark, and 2.3 percent for U.S. Treasuries.

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