LONDON: British gilt yields fell to their lowest levels in five weeks on Tuesday as investors favoured safe-haven assets over risky ones globally, while a solid government debt auction and soft economic data also underpinned bond prices.
Ten-year yields fell 7.5 basis points to 1.36 percent, having bottomed out at 1.344 percent earlier - the lowest level since March 1. Gilt futures were last up by 62 ticks at 121.74.
Their German bond future counterparts also rallied more than 50 ticks as weak German industrial orders data weighed on European stocks.
A 2.75 billion pound sale of five-year gilts attracted bids worth 2.01 times the amount on offer, while a survey of British services companies suggested the economy could have slowed in the beginning of this year.
"It's a proper risk-off day, it's due to the poor tone in the equity market in general," Marc Ostwald, fixed income strategist at ADM Investor Services said.
The auction result "certainly helps," he added. "It's a slightly smaller size for a five year auction than we've had previously, that does help, (but) it was tightly priced so it was taken down very well."
European shares fell to their lowest in almost six weeks, led lower by German stocks, and U.S. stock index futures were lower as comments by U.S. Federal Reserve officials further muddied the outlook for interest rate hikes in the world's largest economy.
March long gilt future 121.74 (+0.62)
June 2016 short sterling 99.405 (unch)
Dec 2016 short sterling 99.39 (+0.02)
10-year gilt yield 1.36 (+7.5 bps)
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