BLBG:Gilts Fall First Time in Six Days Before Auction as Pound Slips
U.K. government bonds fell for the first time in six days as the Debt Management Office prepared to sell 10-year gilts in the first of two sales this week.
The pound slid for a second day versus the euro as investors awaited publication tomorrow of minutes of the Bank of England’s November meeting. The nation’s jobless rate is more likely than not to reach the 7 percent threshold that may prompt policy makers to consider increasing interest rates in the third quarter of 2015, the central bank said last week, having previously stated that it didn’t see that happening until the second quarter of 2016.
“The 2023 gilt is no longer as cheap to its peers as it was,” Marc Ostwald, a strategist at Monument Securities Ltd. in London, wrote in a note to clients. “The focus will be on the cover,” he wrote, referring to the level of demand at the sale.
The U.K. 10-year yield rose two basis points, or 0.02 percentage point, to 2.74 percent at 9:22 a.m. London time after falling eight basis points in the past five days. The 2.25 percent bond maturing in September 2023 fell 0.14, or 1.40 pounds per 1,000-pound ($1,610) face amount, to 95.835.
Today’s sale of 3.75 billion pounds of 2023 bonds will be followed by an auction of 4.75 billion pounds of debt securities due in 2019 on Nov. 21. The U.K. last sold 10-year gilts on Oct. 3 at an average yield of 2.742 percent, down from 2.976 percent at an auction on Sept. 12.
BOE Minutes
Gilts lost 2.7 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1 percent and U.S. Treasuries declined 2.1 percent.
The Bank of England will publish the minutes of its Nov. 7 policy meeting tomorrow. At that gathering, officials kept the key rate at a record-low 0.5 percent and maintained their asset-purchase target at 375 billion pounds.
Sterling fell 0.1 percent to 83.95 pence per euro. The pound was little changed at $1.6102 after reaching $1.6149 yesterday, the highest since Oct. 28.
“We are very bullish on the pound,” Steven Saywell, global head of foreign-exchange strategy at BNP Paribas SA in London, said in a Bloomberg Television interview today. “We’re coming from a point where the pound is very cheap.”
Britain’s currency strengthened 2.6 percent in the past three months, the best performer after the New Zealand and Australian dollars among 10 developed-market counterparts tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 0.9 percent, while the greenback dropped 0.6 percent.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
