The pound advanced to its strongest against the euro in more than a week after a report showed a U.K. manufacturing index climbed in March to the highest level in five months. The British currency rose for a second day versus the dollar as world leaders arrived today for the Group of 20 summit in London, where they aim to formulate plans to overcome the global recession. An index based on a survey of factories climbed to 39.1, from 34.7 in February, the Chartered Institute of Purchasing and Supply and Markit Economics said. Gilts were little changed after the U.K. sold all 3.5 billion pounds ($5 billion) of six-year notes at an auction. “Euro-sterling in the mid-to-low 90s is very, very overvalued,” said Martin McMahon, a Zurich-based currency strategist at Credit Suisse Group AG. “This quarter is probably the final leg of sterling weakness.” The British currency advanced 0.4 percent to 92.15 pence per euro by 12:10 p.m. in London. The pound strengthened 0.5 percent to $1.4390. London’s financial district is braced for protesters taking to the streets today in demonstrations against bankers and world leaders participating in the G-20 summit. Leaders will hold of bilateral meetings before formal talks begin tomorrow. The U.K. sold all the six-year gilts in its first offering of non-inflation linked bonds since failing to find enough buyers at an auction last week. The Debt Management Office, which oversees bond auctions on behalf of the Treasury, received 2.23 times as many bids as securities offered. ‘Poor Supply Picture’ The securities fall within the range of gilts the Bank of England is buying as part of its so-called quantitative easing program. The central bank pledged to buy gilts due within five to 25 years after announcing it would begin printing money to buy corporate and sovereign debt to push borrowing costs lower. “There is appetite for issues that fall within the Bank of England’s quantitative easing zone,” said Richard McGuire, a fixed-income strategist in London at Royal Bank of Canada. “This shows the Bank of England needs to be there to support sufficient investor appetite, given the poor supply picture.” Government bonds were little changed, with the 10-year yield near its lowest level in a week. The yield on the two-year note was at 1.18 percent. The 4.25 percent security due March 2011 fell 0.01, or 10 pence per 1,000-pound ($1,432) face amount, to 105.83. The 10-year note yield was at 3.17 percent. Bond yields move inversely to prices. British government bonds lost 0.8 percent in the first quarter, according to Merrill Lynch & Co.’s U.K. Gilts Index. U.S. debt handed investors a loss of 1.4 percent, according to the firm’s U.S. Treasury Master Index.

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