By Anchalee Worrachate July 2 (Bloomberg) -- U.K. 10-year bond yields held near a 14-month low after Moody’s Investors Service praised Britain’s ability to repay its debt and a report showed shrinking U.S. employment. Gilts are heading for their second weekly gain amid signs the global economy may be stalling, maintaining demand for the safest assets. Moody’s said the U.K.’s financial strength remains “very high,” fuelling optimism the nation will keep its top credit rating, though budget cutbacks may restrict economic growth. The pound fell against the euro and the dollar. “The underlying theme for bonds is the risk of the economy going into a double dip,” said Sean Maloney, a fixed-income strategist at Nomura International Plc in London. “We are likely to be in a low-yield environment for a while. A rise in yield is most likely to be seen as an opportunity to buy.” Gilts stayed little changed after the U.S. job figures. The 10-year yield was at 3.33 percent as of 1:40 p.m. in London, within two basis points of the lowest level since April last year. The 4.75 percent security maturing in March 2020 fell 0.04, or 40 pence per 1,000-pound face amount, to 111.68. Two- year note yields held at 0.76 percent. Pound Climbs Recent data suggested the global economic recovery might be losing steam. Goldman Sachs Group Inc. cut its growth forecast for China this year to 10.1 percent from 11.4 percent as government restrictions on lending and real estate slow expansion in the world’s third-largest economy. The pound rose 0.2 percent to $1.5205, and gained 0.2 percent to 133.22 yen. It fell 0.4 percent against the euro at 82.87 pence. The British currency is set for a fourth weekly gain against the dollar, the longest streak since March 2008, on optimism that the government’s moves to cut the deficit will help the country avoid the soaring debt-servicing costs Greece has experienced. Moody’s said in a publication titled “Credit Opinion” that the U.K.’s top credit rank is based on the country’s “very high” fundamental economic and institutional strength. “Despite the questions raised by the abandonment of the former government’s fiscal rules and the risks taken by the Bank of England with its quantitative-easing policy, the U.K.’s institutions are robust and highly competent,” Moody’s said. The U.K.’s track record on debt repayment since the 17th century “is unparalleled,” the report said. Breakeven Rates Gilts handed investors a 6.52 percent return this year, compared with 7.04 percent for German bonds and 6 percent from Treasuries, according to indexes compiled by Bank of America’s Merrill Lynch unit. The yield difference between two- and 10-year notes narrowed to 256 basis points, the least this year, as investors increased bets that sluggish economic recovery will tame price growth. The U.K. 10-year breakeven rate, a gauge of inflation expectations, fell to 2.88 percentage points from 2.96 percentage points last week. --Editors: Keith Campbell, David Clarke. To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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