LONDON: Long-dated British government bond prices fell to their lowest in a month on Tuesday, following German Bunds and U.S. Treasuries down on renewed hopes of a deal between Greece and the European Union.
Very long-dated gilt prices suffered especially big declines before an auction on Wednesday of 30-year bonds. Short-dated debt was little changed in price.
Major government debt prices tumbled and European shares gained with the euro following media reports of a possible agreement between Greece and its international creditors.
The 10-year gilt yield peaked at 1.686 percent, its highest since Jan. 5. At 1545 GMT, it was up 5 basis points on the day at 1.66 percent.
British debt underperformed German Bunds. The yield spread between 10-year gilts and the equivalent Bund exceeded 130 basis points for the first time this year and peaked at 131.7 basis points, its highest since Nov. 19. It last stood at 128 basis points, up around 3 basis points on the day.
Gilts showed little reaction to a report that British industrial output slowed at the end of last year.
Vatsala Datta, a fixed income strategist at RBC, said rising yields in global government bond markets largely reflected a recent increase in oil prices. But very long-dated gilt prices were also pressured by 1.75 billion pounds ($2.67 billion) of supply coming in Wednesday's 2045 conventional gilt sale, due at 1030 GMT, she said.
"The long-end was trading quite rich versus any measure you look at. Given that we have supply tomorrow, the market is just using that as an excuse for cheapening of the long end,"s Datta said.
The 30-year gilt yield peaked at 2.379 percent, its highest since Jan. 9, and at 1544 GMT was up 7 basis points on the day at 2.37 percent. Two-year yields were 1 basis point lower on the day at 0.42 percent.
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