UK 30-year bonds head for biggest weekly gain since 2009 as stocks plunge

LONDON: British 30-year government bonds recorded their biggest daily price jump in 18 months on Thursday and were on track for their largest weekly rise since the depths of the financial crisis as investors sought safe assets amid plunging global stock markets.

Yields on Britain's benchmark 30-year gilt sank by 9 basis points on the day to 1.84 percent, the biggest fall in a year-and-a-half. Since trading started on Monday, 30-year yields have shed around 25 basis points.

If sustained, this would be the biggest Monday-to-Friday fall in yields since March 2009, when the Bank of England launched its quantitative easing bond purchase plan.

"A lot is being paced by the U.S. move, and in response to equities," ADM Investor Services strategist Marc Ostwald said.

Tumbling oil prices also boosted bonds, he added.

While Brexit is at the forefront of many British investors' minds, fears of an intensified trade conflict between the United States and China have made many international investors bearish and caused them to reduce bets on higher U.S. interest rates.

Yields on five-year U.S. Treasury yields dropped below short-dated two-year yields on Tuesday, an inversion of the yield curve that some analysts view as a harbinger of recession.

U.S. 30-year yields fell to their lowest in almost three months in further sharp price moves on Thursday, and Britain's main share index dropped 3.6 percent on the day, the largest fall since 2016's Brexit vote

"Global market sentiment has had a rollercoaster of a week, opening positively amidst news of a trade truce between the U.S. and China. Soon after however it soured sharply," Investec economist Victoria Clarke said in a note to clients on Thursday.

Canada's arrest of Huawei's chief financial officer on behalf of the United States late on Wednesday added to market fears of a trade war on Thursday.

Investors flocked to a sale of 1.75 billion pounds ($2.24 billion) of British government bonds maturing in 2049 on Thursday, showing the strongest demand since a bond auction in March.

Investor appetite at the sale contrasted sharply with that at an auction of 20-year gilts last month, when the United Kingdom Debt Management Office had to accept unusually low prices to sell its full allocation of gilts.

Shorter-dated gilts -- which are attractive to some investors seeking to hedge against risks of political instability from next week's Brexit vote -- gained almost as much as 30-years on Thursday.

Benchmark 10-year yields sank 7 basis points on the day to 1.24 percent, and briefly touched their lowest since Aug. 21 at 1.225 percent.

Prime Minister Theresa May looks increasingly unlikely to win a parliament vote on her preferred Brexit plan on Dec. 11, which would see Britain exit the EU on March 29 with continued close ties. May has repeatedly said that if lawmakers reject her deal the only alternatives are leaving without one or reversing Brexit.