LONDON: British gilts traded a touch weaker on Friday after Greece's bond swap won strong support from its private creditors, as earlier indicated, but dealers mostly sat on the sidelines ahead of a crucial report on the US labour market.
Gilt futures ticked up by less than 10 ticks a few minutes after data showed that British industrial output suffered a shock fall in January.
The figures raised fresh doubts that the economy will rebound after a contraction at the end of 2011.
But a pick-up in factory gate inflation and businesses' input costs, shown in separate data, caused some analysts to doubt whether the Bank of England would have scope to provide further stimulus to the economy.
At 1200 GMT the June gilt future was 5 ticks down at 115.10, slightly underperforming the equivalent Bund. The British contract traded 4 ticks down on the day at 115.11 shortly before the industrial data was released.
Volumes were thin, with only about 25,000 contracts traded so far, roughly half the usual number for the time of day.
Investors are waiting for US non-farm payrolls data, due at 1330 GMT, which is expected to show that US employment grew solidly for a third straight month in February.
"Payrolls will be the big hitter on the core data docket," 4CAST strategist Jo Tomkins said in a comment on gilts.
In the cash market, the yield on 10-year gilts was 1 basis point up at 2.152 percent, tightening the spread against Bunds a touch to around 34 basis points.
The Greek bond swap will ease the nation's massive public debt and clear the way for a new international bailout, averting the immediate risk of an uncontrolled default.
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