LONDON: British government bond prices fell sharply on Wednesday along with those for other safe-haven assets, as a stabilisation in crude prices prompted investors to favour riskier assets.
Oil prices gained on Wednesday after an unexpected fall in crude storage in the United States, temporarily underpinning British and US stock markets.
Gilt futures settled 58 ticks down on the day at 117.24, the lowest since Monday. Ten-year yields were up 5 basis points at 1.87 percent.
Gilt prices fell by more than their German counterparts, pushing the 10-year yield spread between the two 2 basis points wider on the day to 127 bps.
"Overall I think the main reason (for the move) is the recovery we have seen in equities, stabilisation in oil prices and unwinding of the risk aversion we have seen in the last few days and that's led to some selling pressure on core government bonds," Nick Stamenkovic, strategist at RIA Capital Markets said.
He added that thining liquidity towards year-end could be accentuating those moves.
The move comes one day before the Bank of England's Monetary Policy Committee is widely expected to vote 8-1 to keep interest rates at record lows of 0.5 percent.
Strategists said financial markets were fully pricing in a rate hike by the Bank of England only in January or February of 2017.
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