U.K. government bonds advanced after Greece’s credit worthiness was cut three levels by Fitch Ratings, stoking demand for the British securities as a haven amid concern that Europe’s sovereign debt crisis is worsening. The gains pushed the 10-year yield down for the first time in three days. Fitch cut Greece to CCC from B+ yesterday, citing “the absence of a new, fully funded and credible” program by the International Monetary Fund and the European Union. Thirty- year gilts advanced as the U.K. Debt Management Office prepared to auction 2 billion pounds ($3.2 billion) of 4.25 percent 2040 bonds. The yield on the 10-year gilt fell two basis points to 3.11 percent as 9:14 a.m. in London. The 3.75 percent security maturing in September 2020 rose 0.125, or 1.25 pounds per 1,000- pound face amount, to 105.10. The yield slid to 2.93 percent on July 12, the least since October. Two-year yields were one basis point lower at 0.70 percent. British government bonds have advanced this month as concern that Europe’s sovereign-debt crisis is spreading to some of the euro area’s bigger economies fueled demand for the safest assets, and on speculation that slowing economic growth will limit the Bank of England’s ability to raise rates as the European Central Bank tightens monetary policy. Gilts have returned investors 1.6 percent since the end of June, compared with a 3.7 percent decline by Italian bonds, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish bonds have handed investors a 1.9 percent loss, the indexes show. The pound weakened 0.3 percent to 88.19 pence per euro. It strengthened on July 12 to 87.49 pence, the strongest level since June 16. Sterling was little changed at $1.6110. To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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