BLBG:Pound Advances Against Dollar as BOE Leaves Bond-Purchase Plan Unchanged
The pound rose the most in more than a week against the dollar as the Bank of England said it will leave its debt-purchase program on hold and kept its benchmark interest rate at a record low.
Gilts stayed lower, with 10-year yields rising for the third time in four days. The central bank maintained a pledge to buy 50 billion pounds ($79 billion) of bonds by May under its so-called quantitative-easing program and kept its benchmark interest rate at 0.5 percent. Both decisions were unanimously predicted in separate Bloomberg News surveys of economists. The pound slid against the euro on speculation Greece will attract enough investors to make its debt-swap plan a success.
The decision to announce “no further quantitative easing might support the pound slightly since it is a relief for the market,” You-Na Park, a foreign-exchange strategist at Commerzbank AG in Frankfurt, said before the announcement.
The British currency climbed 0.4 percent to $1.5803 at 12:03 p.m. London time after rising 0.6 percent, the biggest advance since Feb. 29. It depreciated 0.3 percent to 83.79 pence per euro, and touched 83.85 pence, the weakest level since Feb. 29.
Investors with about 60 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll participate, according to data compiled by Bloomberg, putting the country on the verge of the biggest sovereign restructuring in history.
Greek Deal
“News out of Greece will have an effect on euro- sterling,” Park said. “If it looks like the Greek deal will work as planned than this would be positive for the euro.”
Sterling has weakened 1 percent this year, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar declined 2.8 percent, and the euro dropped 0.5 percent.
The 10-year gilt yield was two basis points higher at 2.16 percent. Two-year yields were little changed at 0.44 percent.
“No one was expecting any changes from the meeting,” John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London, said before the Bank of England decision. “I don’t expect a meaningful reaction in the gilt market.”
The 10-year yield climbed three basis points to 2.23 percent after the central bank raised the ceiling on bond purchases to 325 billion pounds at last month’s meeting.
Gilts have handed investors a 0.8 percent loss this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. U.S. Treasuries have dropped 0.3 percent and German government bonds have gained 0.4 percent.
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
