BLBG:Gilts Fall First Time in 7 Days, Pound Rises on ECB 3-Year Loan Allotment
U.K. 10-year bonds fell for the first time in seven days as the European Central Bank lent financial institutions more three-year cash than analysts estimated, sapping demand for the safest fixed-income assets.
Sterling reached a three-month high against the dollar after GfK NOP Ltd. said U.K. consumer confidence held at the most since June last month amid slowing inflation. The pound strengthened for a fourth day against the euro as Europe’s banks took 529.5 billion euros ($712 billion) in three-year loans, compared with a 470 billion-euro median estimate in a Bloomberg News survey of 28 economists.
“The number is pretty much in line with our expectations so I think the mild risk-on sentiment that we were seeing will sustain,” said Vatsala Datta, an interest-rate strategist at Lloyds Bank Corporate Markets in London. “Gilts should remain under slight pressure as a consequence.”
The 10-year gilt yield rose two basis points, or 0.02 percentage point, to 2.12 percent at 11:15 a.m. London time. The 4 percent security due March 2022 fell 0.165, or 1.65 pounds per 1,000-pound ($1,595) face amount, to 116.91. Two-year yields were little changed at 0.41 percent.
The pound rose 0.3 percent to $1.5946, after reaching $1.5959, the highest since Nov. 14. Sterling also rose above its 200-day moving average of $1.5902.
Mortgage Approvals
Britain’s currency strengthened 0.4 percent to 84.29 pence per euro, paring its first monthly loss since October.
An index of sentiment remained at minus 29 from January, the strongest reading since June, London-based research group GfK NOP said in an e-mailed report today. U.K. mortgage approvals rose to a two-year high of 58,728 in January, from 55,019 the previous month, a Bank of England report showed.
After breaking through its 200-day moving average against the dollar, the pound may reach $1.60 “by the end of this week,” said Axel Rudolph, a senior technical analyst at Commerzbank AG in London. “Should it continue to rally, the $1.6092-$1.6129 zone could also be reached,” he said.
Gilts also fell as Bank of England Deputy Governor Paul Tucker said policy makers must be ready to withdraw stimulus when the U.K. economy strengthens.
“We must be alert to the need gradually to withdraw stimulus as and when recovery builds,” Tucker said in a speech in London yesterday. “Stimulus can be sustained only so long as medium-term inflation expectations remain anchored” to the central bank’s 2 percent target, he said.
The Bank of England’s Monetary Policy Committee agreed this month to increase the size of its emergency bond-purchase program by 50 billion pounds after the economy contracted in the fourth quarter.
Gilts have handed investors a 0.7 percent loss this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German government bonds are 0.3 percent stronger for the year and U.S. Treasuries slipped 0.1 percent.
Sterling has weakened 1.4 percent in 2012, the third-worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Japanese yen has dropped 8.9 percent and the dollar has depreciated 4.2 percent.
-- Editors: Paul Dobson, Nicholas Reynolds
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
