LONDON: Gilt futures were little changed on Tuesday, with long-dated debt coming under particular pressure from fresh supply of 2034 gilts and investors' greater willingness to sell 15-year and longer paper at a Bank of England buyback.
The December gilt future settled 4 ticks higher at 120.15 after sliding by 44 ticks in the previous session. The equivalent Bund future settled 6 ticks up.
Markets were cautious a day before a ruling by Germany's top court that is expected to give the go-ahead to the euro zone rescue fund, albeit with tough conditions.
"There's been nothing notable, risk appetite so far remains robust," said BNP Paribas strategist Shahid Ladha.
European shares edged higher as Deutsche Bank led a rally among euro zone banks. US stocks were also firmer, with investors expecting quiet trading ahead of the German court's decision and possible policy action from the Federal Reserve that could point to more monetary stimulus.
Ten-year gilt yields were steady at 1.737 percent, with their spread over Bunds 2 basis points wider at almost 20 basis points.
Gilts maturing in 20 to 50 years lagged, with their yields up between around 1 and 2 basis points.
The Bank of England received an offer-to-cover ratio of 2.71 at its buyback of gilts with maturities of 15 years and longer, up from the ratio of 2.41 at its last reverse auction for similar gilts.
Earlier in the session, the auction of 1.25 billion pounds ($2 billion) of 2034 index-linked gilts was covered a respectable 1.55 times.
Gilts gave little reaction to data showing that Britain's goods trade deficit narrowed more than expected in July, nor to comments by new BoE policymaker Ian McCafferty to a parliamentary committee.
McCafferty took a cautious line on the need for another cash boost to the recession-hit British economy, saying his decision would hinge on a clearer view of the economy's health.
Fellow policymaker David Miles is due to speak at 1715 GMT and on Wednesday, Britain will release July unemployment data.
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