LONDON: The difference in yields between British and German 10-year government bonds widened on Monday to hit its highest since 1998, as traders increased bets on divergent outlooks for official interest rates.
Ten-year gilt yields rose almost 5 basis points on the day to hit a one-month high of 2.733 percent, causing the spread over 10-year Bunds to widen more than 3 basis points to peak at 126.6 basis points by 0759 GMT, a level last seen in August 1998.
Yields on two- and five-year gilts rose to their highest levels since mid 2011 at 0.804 percent and 2.046 percent respectively.
"The gilt market is very much on the message that the Bank of England will sound more hawkish at the Inflation Report press conference," said Monument Securities fixed income strategist Marc Ostwald.
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