LONDON: British government bonds tracked German Bunds higher on Tuesday after a split Italian election result sparked fears of political instability in the euro zone's third-biggest economy.
At 0844 GMT, the March gilt future was 93 ticks higher at 117.04. The equivalent Bund future, which has tended to gain more than gilts when investors seek a safe haven from the debt problems of Spain and Italy, was just over a point up on the day.
"The cloud of Italian political uncertainty will be with us at least until the second half of March and this is likely to provide further support to core bond markets in the near term," said Lloyds strategists.
Last week's decision by ratings agency Moody's to downgrade Britain to Aa1 provided modest background pressure on gilts.
Britain's Debt Management Office is expected to sell 2052 index-linked gilts via syndication this session.
The last such deal of the 2012/13 financial year needs to raise around 3.8 billion pounds ($5.7 billion) to meet Britain's target for funding via syndication this year.
Ten-year gilt yields fell 6 basis points to 2.02 percent, while their spread versus equivalent Bund yields was broadly steady at 53 basis points.
Comments
Comments are closed for this article.