LONDON: The difference in yields between British and German 10-year government bonds widened on Monday to its highest since 1997, albeit during quiet trading because of public holidays in parts of continental Europe.
Ten-year gilt yields rose more than three basis points on the day to 2.689 percent, while its spread over 10-year Bunds touched 133.2 basis points, the highest since the third quarter of 1997.
Marc Ostwald, strategist at Monument Securities, said trading volumes were thin because of the Whit Monday holiday in many European countries, but added that the rising spread also reflected the differing outlooks for the euro zone and British economies.
On Saturday, European Central Bank policymaker Benoit Coeure said extremely low euro zone interest rates would diverge from those in the United States and Britain for a number of years.
"That implies a widening of the spread in itself," said Ostwald, who also cited a big upward revision to growth forecasts from British manufacturers on Monday as another reason for gilts' underperformance.
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