U.K. Bonds in Longest Winning Run on Record Before BOE Meeting

  • Gilts climb for 11th day, in best stretch since at least 1989
  • U.K. sovereign securities have returned 5.6 percent in 2016

U.K. 10-year government bonds advanced for a 11th day, set for their longest stretch of gains since at least 1989, as investors awaited a Bank of England policy decision that’s overshadowed by an economic slowdown and next month’s referendum on membership of the European Union.

U.K. securities have returned 5.6 percent in 2016, almost twice as much as their euro-area peers, according to Bloomberg World Bond Indexes. While the pound has declined as investors considered the implication of a vote to leave the EU, gilts have been insulated by the prospect of a slowing economy and a prolonged period of low interest rates.

All 41 economists in a Bloomberg survey forecast policy makers led by Governor Mark Carney will leave the rate unchanged Thursday. The central bank will also release its quarterly Inflation Report.

“The U.K. is clearly losing momentum and the message from the Bank of England will be one of caution,” said Nick Stamenkovic, a rates strategist at broker RIA Capital Markets Ltd. in Edinburgh. “The backdrop is one where the global economy is still weak. With the BOE and most central banks in an accommodative mode, gilt yields are set to remain low for a considerable period of time.”

Benchmark 10-year gilt yields fell three basis points, or 0.03 percentage point, to 1.36 percent as of 8:26 a.m. London time. The 2 percent bond due in September 2025 rose 0.255, or 2.55 pounds per 1,000-pound ($1,421) face amount, to 105.55. The yield, which has dropped from 1.66 percent on April 26, touched a record-low 1.226 percent in February.

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