LONDON: British government bonds drifted down on Monday, with investors reluctant to make bold bets before they have an insight into what the Bank of England discussed at its first policy meeting chaired by new governor Mark Carney.
At 1325 GMT, September gilt futures were 29 ticks lower on the day at 112.80, near the levels seen earlier in the session before disappointing US retail sales data prompted a temporary rebound.
Bund futures were 21 ticks down.
At only 68,000 gilt future contracts so far, trading volumes were scant.
Gilts gave up some of last week's big gains, which originated in the Federal Reserve's reassurance that its monetary policy would stay accommodative.
"The market is looking towards relatively dovish (minutes) on the back of the surprise we got in the post-MPC statement, effectively talking down short-term interest rates," said RBS strategist Simon Peck.
On July 4, the BoE's Monetary Policy Committee showed markets it was in no rush to raise rates.
"But the thing is, you've got the feedback from the MPC in early August on what they think on forward guidance, so I would argue that to some extent they can't go too far in the minutes," Peck said.
The MPC is due to report back to finance minister George Osborne in early August on the merits of adopting clear signals on how long it will keep interest rates low, and possible economic thresholds for considering such a change in policy.
Ten-year yields rose 1 basis point to 2.338 percent, with their spread over Bunds steady at 77 basis points.
"The MPC has sent a fairly strong message that it aims to at least cap yields and could do more, including QE (quantitative easing), if forward guidance alone is not enough to achieve this," Citi strategists wrote in a note.
"Gilts have started to outperform Treasuries since (the) MPC statement, but this has much further to run, in our view."
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