LONDON: British government bond yields rose moderately on Wednesday after minutes from the Bank of England showed two policymakers unexpectedly voted to start raising interest rates this month.
Short-dated gilt prices, most sensitive to changes in interest rate expectations, lagged longer-dated bonds.
The two-year gilt yield rose around 4 basis points following the minutes to its highest level in a week at 0.764 percent. Five-year gilt yields also rose around the same amount.
Short sterling futures fell between 4 and 6 ticks across the 2015 contracts, indicating financial markets have upped bets for a 2014 rate hike - but only slightly, according to RBS strategist Simon Peck.
"The front end's come under a little bit of pressure, but not a huge amount in terms of repricing though. A couple of basis points have been added in to expectations for a rate hike by the end of this year," said Peck.
"Perhaps a bit less of a reaction that you might have expected, but nonetheless, there's a bit of underperformance at the short end."
The yield spread between the 10-year gilt and the equivalent German Bund widened more than 2 basis points after the minutes to its highest level in a week at 143.7 basis points, and was at 142.5 basis points at 0948 GMT.
Comments
Comments are closed for this article.