LONDON: British gilts nudged higher on Friday with investors on tenterhooks anticipating a close decision by the Bank of England on more monetary stimulus next week.
The December gilt future settled 14 ticks higher at 119.13, in line with its German counterpart, erasing earlier sharp losses after US non-farm payrolls showed surprisingly strong hiring in October.
"Investors are probably very unwilling to take big positions ahead of (the monetary policy meeting)," said RBC Capital Markets strategist Sam Hill.
Many economists have been predicting no further monetary stimulus in Britain for now since data last week showed the economy grew 1 percent in the third quarter. The Bank of England's latest round of bond purchases ended this week.
Gilts have underperformed German Bunds recently and the trend is likely to continue even if the BoE were to announce more QE next week, Hill said.
"They're cooling on their love of QE or they certainly think it's less effective than it was... You've just got to, in the medium term, price in a lower probability of central bank sponsorship for the gilt market," he said.
"And on the other side you've got the fact that (government) borrowing is going to be revised higher," he added.
Investors will also watch the PMI survey of Britain's service sector due on Monday, expected to show a slight slowdown in growth in the sector.
Ten-year gilt yields were steady at 1.865 percent, with their spread versus Bund yields also steady at around 41 basis points.
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