Gilts fell after an industry report showed the country’s home prices unexpectedly climbed last month and U.K. stocks advanced for a third day, supporting investor appetite for riskier assets. Government bonds declined as the FTSE 100 Index climbed above 4,000 for the first time in almost six weeks. U.K. house prices had their first increase since October 2007, Nationwide Building Society said today. Gilts stayed lower even after the government successfully sold 2.25 billion pounds ($3.3 billion) of 30-year bonds. “U.K. economic news has been quite encouraging,” said Orlando Green, assistant director of capital markets in London at Calyon, the investment-banking arm of Credit Agricole SA. “The way the markets have been behaving is fostering confidence.” The yield on the 10-year note rose 14 basis points, or 0.14 percentage point, to 3.27 percent at 2 p.m. in London. The 4.5 percent security due in March 2019 decreased 1.24, or 12.4 pounds per 1,000-pound face amount, to 110.39. The 30-year yield increased 12 basis points to 4.23 percent. Bond yields move inversely to prices. Government bonds fell as the FTSE 100 Index added 97.90, or 2.5 percent, to 4,053.51, climbing for a third day and weakening demand for relatively safe assets such as sovereign debt. The debt extended declines after the European Central Bank unexpectedly cut its benchmark rate by less than economists forecast to 1.25 percent. The decision was predicted by just four of the 55 economists surveyed by Bloomberg. U.K. Bond Sale The U.K. sold 30-year bonds today in the first long-dated sale since the Debt Management Office failed to find enough buyers for 1.75 billion pounds of 40-year bonds last week. At today’s auction, the government agency received 1.59 times as many bids as securities offered. Today’s sale was also the first since the failed auction that’s outside the maturity range targeted for purchase by the Bank of England in its quantitative-easing program. The bank said it will buy government bonds maturing in 5 to 25 years as part of a program to reduce borrowing costs after cutting the target lending rate to 0.5 percent, the lowest level in the bank’s 315-year history. Last week, when the Debt Management Office tried to sell bonds due in 40 years, it received bids for 93 percent of the offering, the first failed conventional-gilt sale since 1995. Stimulus Program The office may sell as much as a record 147.9 billion pounds of bonds in the fiscal year ending March 31, 2010, to support a fiscal stimulus program and bank bailouts. Sterling rose on speculation the pace of the U.K.’s contraction may be slowing after Nationwide Building Society reported that the average cost of a home increased 0.9 percent in March from the previous month to 150,946 pounds. All 13 economists in a Bloomberg News survey predicted a decline. “The pound is very sensitive to the fortunes of the domestic housing market,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “The pound is increasing on the back of this upside surprise.” The British currency advanced 1.7 percent to $1.4712. It strengthened 0.3 percent to 91.35 pence per euro and climbed 2.5 percent to 146.17 yen.

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