BLBG:Pound Weakens Versus Euro Before U.K. Manufacturing Orders Data
The pound weakened against the euro, snapping a two-day advance, before an industry report that economists said will show a gauge of U.K. manufacturing orders dropped at a slower pace in November.
Sterling reached a two-week high versus the dollar. The Confederation of British Industry’s factory orders index rose to minus 20 from minus 23 in the previous month, according to the median forecast of 15 economists in a Bloomberg News survey. Bank of England policy makers including Governor Mervyn King and Deputy Governor Paul Tucker testified before the Parliamentary Commission on Banking Standards. Gilts were little changed as the Debt Management Office prepares to sell index-linked bonds.
“Although sterling has received some support from the situation in the euro zone, there are some challenges in terms of economic fundamentals that could limit any rebound in sterling,” said Ian Stannard, the head of European currency strategy at Morgan Stanley in London. “The market will watch very closely forward-looking indicators such as the CBI industrial trends.”
The pound weakened 0.3 percent to 80.65 pence per euro at 10:42 a.m. London time after appreciating to 80.06 pence yesterday, the strongest since Nov. 14. The U.K. currency was little changed at $1.5950 after rising to $1.5978, the most since Nov. 9.
Sterling has gained 1.4 percent this year, according to Bloomberg Correlation-Weighted Indexes which track 10 developed- market currencies. The euro declined 2.4 percent and the dollar dropped 1.5 percent.
Gilt Sale
The 10-year gilt yield rose less than one basis point, or 0.01 percentage point, to 1.86 percent. The 1.75 percent security due in September 2022 traded at 99.045. Two-year gilts yielded 0.31 percent.
The DMO is scheduled to sell index-linked gilts due in 2044 through banks. Bank of America Corp., Deutsche Bank AG, HSBC Holdings Plc and Nomura International Plc were hired to lead the sale.
The banks have received more than 5 billion pounds in orders so far, according to a person familiar with the deal, who asked not to be identified because he is not authorized to speak about it. The initial guidance is for the bond to be priced at 7 to 7.5 basis points more than the yield of the 0.625 percent index-linked debt maturing in November 2042.
The yield on the 2042 security climbed five basis points to 0.23 percent.
Bond Program
Ten-year gilt yields will rise to 2.25 percent by the end of June next year as the economy recovers and after the Bank of England halted its bond purchases under its quantitative-easing program, according to JPMorgan Chase & Co.
Central bank policy makers decided at their November meeting to refrain from expanding the 375 billion pound-program, which was aimed to boost the economy.
“After a disappointing 2012, we expect a low pick-up in the U.K. economy over 2013, driven predominantly by an improving global backdrop,” London-based JPMorgan strategist Francis Diamond wrote in a research note dated Nov. 21. “We think that the BOE’s quantitative-easing program has ended and that monetary policy will be kept unchanged over 2013.”
Gilts returned 2.5 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 3.4 percent and U.S. Treasuries earned 2.4 percent.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
