BLBG:Gilts Gain as Stocks Fall, Home Loans Stagnates; Pound Rises
U.K. gilts advanced for a second day as stock losses and a Bank of England report showing mortgage lending stagnated last month boosted demand for the perceived safety of fixed-income assets.
The gain trimmed 10-year gilts’ biggest monthly loss since January. Lenders granted 53,710 home loans compared with a revised 53,674 in March, the Bank of England said today. The median estimate of economists was for an increase to 54,600. Sterling rose against the euro for the first time in three days after a report showed the jobless rate in the 17-nation currency bloc surged to a record in April.
“The economic outlook is still not very encouraging in the U.K. despite some improvement,” said Annalisa Piazza, a fixed-income analyst at Newedge Group in London. “Weak data from the U.K. as well as from the euro zone suggests monetary policy will stay accommodative. That and declining stocks help to support demand for government bonds.”
Ten-year gilt yields dropped four basis points, or 0.04 percentage point, to 1.93 percent at 11:30 a.m. London time as the FTSE-100 Index of stocks fell 1 percent. The 1.75 percent security due September 2022 rose 0.29, or 2.90 pounds per 1,000-pound ($1,519) face amount, to 98.46. The yield on two-year gilts fell two basis points to 0.35 percent.
The 10-year yield has risen 24 basis points since April 30.
BOE Lending
House prices had their biggest annual increase in 18 months in May as the BOE’s Funding for Lending Scheme eased access to mortgages, Nationwide Building Society said yesterday. Still, approvals are only about half the monthly average in the decade to 2007, when the financial crisis struck, and the central bank has maintained monetary stimulus to cement the economic recovery.
The pound appreciated 0.3 percent to 85.44 pence per euro. It dropped 0.3 percent to $1.5192 after rising to $1.5240, the most since May 21.
The euro-area unemployment rate rose to 12.2 percent from 12.1 percent in March, the European Union’s statistics office in Luxembourg said today, in line with the median estimate of economists surveyed by Bloomberg News.
Sterling has fallen 2.5 percent this year, the worst performer after the yen and Australian dollar among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The U.S. currency gained 5.2 percent and the euro strengthened 3.3 percent.
U.K. gilts lost 2.2 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds dropped 1.5 percent and U.S. Treasuries declined 1.8 percent.
Securities in the Bank of America Merrill Lynch Global Broad Market Index fell 1.4 percent through May 30, poised for the steepest loss since April 2004.
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
