U.K. 10-year bond yields held near a 14-month low as Moody’s Investors Service praised Britain’s ability to repay its debt ahead of a report forecast to show shrinking U.S. employment. Gilts are heading for their second weekly gain amid signs the global economy may be stalling, maintaining demand for the safest assets. Moody’s said the government’s financial strength remains “very high,” fuelling optimism that Britain will be able to safeguard its top credit rating, though budget cutbacks may restrict economic growth. The pound gained against the euro. “The gilt market might be choppy into the U.S. jobs data later this afternoon,” said Sean Maloney, a fixed-income strategy at Nomura International Plc in London. “But the underlying theme for bonds is the risk of the economy going into a double dip. We are likely to be in a low-yield environment for a while.” The 10-year gilt yield rose one basis point to 3.33 percent as of 10:25 a.m. in London, within two basis points of the lowest level since April last year. The 4.75 percent security maturing in March 2020 fell 0.07, or 70 pence per 1,000-pound face amount, to 111.59. Two-year note yields advanced one basis point to 0.77 percent. U.S. payrolls declined by 130,000 last month, according to the median estimate of 82 economists surveyed by Bloomberg News, which would be the first monthly decline this year. Private employment, which excludes government jobs, rose for a sixth consecutive month, the survey showed. Pound Climbs Recent data suggested the global economic recovery might be losing steam. Goldman Sachs Group Inc. cut its growth forecast for China this year to 10.1 percent from 11.4 percent as government restrictions on lending and real estate slow expansion in the world’s third-largest economy. The pound rose 0.3 percent against the yen to 133.37 and strengthened to 82.38 pence per euro. Sterling was little changed against the dollar at $1.5170. The British currency is set for a fourth weekly gain against the dollar, the longest streak since March 2008, on optimism that the government’s moves to cut the deficit will help the country avoid the soaring debt-servicing costs Greece has experienced. Moody’s said in a publication titled “Credit Opinion” that the U.K.’s top credit rank is based on the country’s “very high” fundamental economic and institutional strength. “Despite the questions raised by the abandonment of the former government’s fiscal rules and the risks taken by the Bank of England with its quantitative-easing policy, the U.K.’s institutions are robust and highly competent,” Moody’s said. The U.K.’s track record on debt repayment since the 17th century “is unparalleled,” the report said. Gilts handed investors a 6.52 percent return this year compared with 7.04 percent gain from German bonds and 6 percent from Treasuries, according to indexes compiled by Bank of America’s Merrill Lynch unit. To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

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