BLBG:Pound Drops Against Euro Before U.K. Manufacturing Data
U.K. government bonds fell, with 10- year yields climbing to the highest level in two weeks, after a report showing mortgage approvals increased in December damped demand for safer securities.
Thirty-year gilt yields rose to the most since April amid signs the Bank of England’s efforts to spur growth, including its Funding for Lending Scheme to encourage banks to offer more loans, are gaining traction. The pound weakened to a 13-month low against the euro after European data showed economic confidence in the region improved this month.
“I stick with the view that gilt yields are going higher with a resurgence of risk appetite, which is playing into the negative gilts theme,” said Jason Simpson, a rates strategist at Banco Santander SA in London. “The lending numbers that came out today were above consensus, suggesting credit conditions continue to improve. Some of this will have been due to the Funding for Lending Scheme.”
The yield on the benchmark 10-year gilt rose three basis points, or 0.03 percentage point, to 2.12 percent at 11:49 a.m. in London, the highest level since Jan. 11. The 1.75 percent bond maturing in September 2022 fell 0.24, or 2.40 pounds per 1,000-pound face amount, to 96.845.
Lenders granted 55,785 mortgages last month, compared with 54,011 in November, the central bank said in London. That’s the most since January 2012. Economists forecast 54,500 approvals, according to a Bloomberg News survey.
The pound depreciated 0.4 percent to 85.97 pence per euro after declining to 86.07 pence, the weakest since Dec. 7, 2011. The U.K. currency was little changed at $1.5765, after dropping to $1.5675 on Jan. 28, the lowest since Aug. 17.
Gilts have handed investors a loss of 2 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds dropped 1.9 percent and Treasuries fell 1 percent.
To contact the reporters on this story: Neal Armstrong in London at narmstrong8@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
