LONDON: British government outpaced their German counterparts on Tuesday after UK factory and housing data pointed to weakness in the economy that could prompt more gilt buying by the central bank.
Manufacturing activity shrank for a second month in a row in March, with output falling at its fastest pace since October, a survey of purchasing managers found.
Bank of England data showed the number of mortgage approvals for house purchase fell again in February, hitting the lowest level since September though the value of home-backed lending rose from January.
Analysts said the data would keep up pressure on the BoE to extend its quantitative easing programme this year to boost the economy, though probably not at this week's policy meeting.
At 1132 GMT, June gilt futures were 5 ticks lower at 118.73, while Bund futures were 29 ticks down on the day.
"It's all down to the weak PMI and people probably raising their expectations of more QE," said Morgan Stanley strategist Anthony O'Brien, also noting the disappointing mortgage figures.
He added that gilts were also reversing their underperformance versus Bunds in the latter half of last week.
German Bund futures fell to a session low on Tuesday, backing away from the near four-month highs seen last week as stock markets extended gains and some investors looked to take profits on low-risk assets.
Gilt trading volumes were thinner than usual, with many market players still away after the long Easter weekend.
In the cash market, 10-year gilt yields inched down 1 basis point to 1.77 percent, with their spread versus equivalent Bund yields 2 basis points tighter at 46 basis points.
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