LONDON: Ten-year gilt yields hit a six-month low early on Thursday as worries about faltering global growth supported major debt markets but they bounced off chart resistance to stand little changed by the mid-session.
Trade was choppy as gilts took their cues from Bunds, and investors awaited key U.S. employment data on Friday.
Bunds hit a four-month high after a further downgrade of Greece's credit rating but retreated after a solid Spanish bond sale and reports that a new aid package for Greece was about to be completed.
By 1050 GMT, the September gilt future was 11 ticks higher at 120.65, off an earlier contract high of 120.86 but outperforming Bund futures which were flat.Ten-year gilt yields fell as low as 3.225 percent in early trade, a drop of 60 basis points since mid-April.
RBS technical strategist Dmytro Bondar said a break of 3.220 percent strong polarity resistance and the 61.8 percent retrenchment of the August 2010 to February 2011 impulse wave could pave the way for another downward lurch in yields, possibly to 3.07 percent.
"Whether this level breaks or not will probably depend on Friday's U.S. payrolls data," he added.
A survey on Wednesday showed U.S. employers hired far fewer workers than expected last month, leading some analysts to revise down their forecasts for Friday's payrolls. U.S. weekly jobless claims are due at 1230 GMT. European stock markets were trading around 0.8 percent lower by the mid-session.
With so much attention focused on the U.S. economy, there was little reaction to a survey showing Britain's construction sector grew faster than expected last month or to a lacklustre 10-year gilt auction.
Marc Ostwald at Monument Securities said the relatively low bid-to-cover ratio of 1.6 reflected investors' reluctance to buy at current low yields.
"There's not much end-investor participation in the marke at the moment," he said. "Yields are at levels that just don't look appealing."
Copyright Reuters, 2011
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