U.K. Bonds Surge at Open as 10-Year Yield Drops to One-Week Low

U.K. government bonds rose, pushing 10-year yields to the lowest in a week, as traders prepared for a Bank of England policy decision a day after the Federal Reserve said it expected to raise interest rates at a slower pace than previously estimated.

The yield on benchmark 10-year gilts fell 10 basis points, or 0.1 percentage point, to 1.42 percent as of 8:22 a.m. London time. The 2 percent bond due in September 2025 climbed 0.92, or 9.20 pounds per 1,000-pound face amount, to 105.11. The yield reached the lowest since March 9.

Forward contracts based on the sterling overnight index average, or Sonia, aren’t fully pricing in a 25 basis-point increase to the BOE’s official rate until 2017 at the earliest.

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