BLBG:U.K. Bonds Advance as Manufacturing Contracts; Pound Declines
U.K. government bonds advanced, extending three weeks of gains, after a report showed the nation’s manufacturing output contracted more than economists forecast in March.
The pound fell against the euro as Cypriot government officials said they would seek easier bailout terms in talks with the European Union and International Monetary Fund today. Bank of England policy makers are due to meet this week after minutes of their last two meetings showed three members of the Monetary Policy Committee voted to increase their asset-purchase plan, known as quantitative easing, from 375 billion pounds ($571 billion).
“People are less than optimistic on the U.K. at the moment,” said Simon Peck, a fixed-income strategist at Royal Bank of Scotland Group Plc in London. “There’s also a policy meeting this week so the time is ripe for more speculation on potential further quantitative easing. What’s going on in Cyprus is also helping safe-haven flows and the bid for gilts.”
The 10-year gilt yield slipped two basis points, or 0.02 percentage point, to 1.75 percent at 10:32 a.m. London time. The 1.75 percent bond due in September 2022 rose 0.15, or 1.50 pounds per 1,000-pound face amount, to 100. The yield dropped 29 basis points in the past three weeks.
Manufacturing Gauge
A gauge of U.K. manufacturing, based on a survey of purchasing managers, was 48.3 last month from 47.9 in February, Markit Economics and the Chartered Institute of Purchasing and Supply said today. That compares with the 48.7 median estimate of economists in a Bloomberg News survey. A reading below 50 indicates contraction.
Mortgage approvals fell more than economists forecast in February. Lenders granted 51,653 home loans, the least since September, compared with a revised 54,187 in January, the Bank of England said in London.
The pound fell 0.1 percent to 84.49 pence per euro and slid 0.2 percent to $1.5194.
The pound has lost 4.5 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro fell 0.4 percent and the dollar gained 2.7 percent.
Gilts have returned 0.7 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 0.4 percent and Treasuries were little changed.
To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
