LONDON: British government bond prices hit their highest level in a week on Wednesday, extending a rally fuelled by Federal Reserve chair Janet Yellen's suggestion that the central bank was in no rush to raise interest rates.
The 10-year gilt yield reached a low of 1.688 percent, its lowest level since last Wednesday, and at 1540 GMT was down 6 basis points on the day at 1.70 percent.
Thirty-year gilt yields fell to a two-week low of 2.384 percent, also 7 basis points down on the day.
Speaking on Tuesday, Yellen held back from giving a clear view on when the Fed will begin raising rates, and hinted that it might not be until at least two policy meetings have passed.
"There's been a general rally in core European fixed income that's been catching up with the post-close Fed (market) moves last night," said Simon Peck, rates strategist at RBS.
Gilts sharply outperformed German government debt earlier in the day, with the yield spread between 10-year gilts and Bunds bottoming out at 134.6 basis points, the lowest level since last Tuesday.
Later on Wednesday the spread was at 137 basis points, down around 2 basis points on the day.
Peck said that imminent gilt coupon payments provided gilt prices with added impetus going into the end of the week.
"It's difficult to judge whether that's impacting that much on today's price action, but it's another relevant supportive consideration for the market over the next few days."
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