SF: Gilt Yields Stay Near 16-Month Low After 3 Billion-Pound Sale
Aug. 12 (Bloomberg) -- U.K. 10-year government bond yields stayed near a 16-month low after a gilt sale that analysts said showed investor demand is holding up even after prices rose.
Two-year yields reached the lowest since November after debt securities rallied yesterday when the Bank of England cut its forecast for U.K. economic growth and said inflation will undershoot its target in 2012. The U.K. sold 3 billion pounds ($4.7 billion) of debt maturing in 2022. The pound reached its lowest level against the dollar this month.
"It's basically a solid auction and shows there's that willingness to take these bonds on board despite the very-low- yield environment," said Orlando Green, an interest-rate strategist at Credit Agricole Corporate & Investment Bank in London. "There's that sense of risk aversion still very much at the forefront of investors' minds."
The benchmark 10-year yield slipped less than one basis point to 3.14 percent as of 11:30 a.m. in London. The 4.75 percent security maturing in March 2020 climbed 0.08, or 80 pence per 1,000-pound face amount, to 113.25. The yield reached 3.12 percent yesterday, the lowest since April 1, 2009. The two- year yield fell four basis points to 0.7 percent, the lowest since Nov. 11.
Sterling fell 0.4 percent to $1.5602 after reaching $1.5585, the lowest level since July 30. It was little changed at 82.16 pence per euro.
The bond sale today drew an average yield of 3.485 percent, with investors bidding for 1.72 times the amount of securities on sale. At a previous auction of the gilts in March, the yield was 4.333 percent, with a bid-to-cover ratio of 2.01 percent.
