LONDON: British gilt futures rallied in early trade on Monday, taking their cue from Bunds which climbed on worries that a European Union summit later this week would not yield firm measures to tackle the region's debt crisis.
Equity markets slipped and yields on peripheral euro zone government bonds rose, driving investors into safer assets. Traders said gilt prices were likely to be driven by other markets this session given the absence of UK-specific news.
At 0742 GMT, the September gilt future was 46 ticks up at 119.59, lagging the equivalent Bund by around 14 ticks.
In the cash market, the yield on ten-year gilts was 4 basis points lower at 1.682 percent, widening the spread against Bunds by 1.5 basis points to 15.5 basis points.
"We have the EU summit this week and we're getting into month-end as well," said a London-based trader. "A bit of risk-off mentality is giving a bid to the bond market, with gilts pretty much in line with Bunds across the board."
European leaders will discuss specific steps towards a cross-border banking union, closer fiscal integration and the possibility of a debt redemption fund, according to a document prepared for the June 28-29 meeting.
"With the market having low expectations (for)... the week-end summit but remaining cautious of the weakening economic environment, the focus will be on the periphery," said analysts at Lloyds Bank in a note.
In the UK, Bank of England policymaker David Miles said a substantial amount of quantitative easing was needed to kick-start Britain's stalled economy.
The central bank is widely expected to restart its asset purchase programme next month after Miles, along with three other members of the Monetary Policy Committee, voted to inject more stimulus this month.
Comments
Comments are closed for this article.