LONDON: Gilts traded higher early on Thursday after a budget announcement on Wednesday reaffirmed Britain's commitment to effectively wipe out the deficit by 2015.
British bonds were also supported by investors seeking refuge from concerns about euro zone debt after the resignation of Portugal's prime minister increased expectations Lisbon will need a bailout sooner rather than later.
"The (British) chancellor tried to balance between promoting some growth but also saving as much as possible in terms of reducing the deficit," said Orlando Green, strategist at Credit Agricole.
"That's generally positive for the credit worthiness, if you like, of gilts."
Britain's government is attempting to eliminate most of a deficit of 10 percent of national output before the 2015 election, while nurturing the economy back to health following the global financial crisis. It is cutting public spending by 81 billion pounds over the next four years, while already-announced tax rises will start to kick in from next month.
"Maybe there's concern about general risk factors in the euro area about the euro area's debt crisis," Green added.
At 0844 GMT June gilt futures were 17 ticks higher at 118.45, in line with Bund futures. Ten-year gilt yields were down 2 basis points at 3.54 percent.
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