LONDON: Gilts fell in early trade on Monday, as investors moved back into riskier assets on hopes that US policymakers would make progress in averting a fresh round of spending cuts and tax increases in the new year.
Leading US lawmakers expressed confidence on Sunday that they could reach a deal to head off looming across-the-board tax hikes and spending cuts, which could push the economy back into recession.
"Weekend reports that Congressional leaders have agreed to fast track budget negotiations may prove positive for risk assets today," said Lloyds strategists.
Britain's main share index, the FTSE 100 index was up 46.65 points, or 0.8 percent, at 5,652.24 by 0808 GMT, having dropped 1.3 percent on Friday.
At 0830 GMT, the December gilt future was 25 ticks lower at 120.26, while the equivalent Bund was 17 ticks lower at 143.14.
Ten-year gilt yields rose nearly three basis points to 1.76 percent. Their spread versus Bund yields was nearly 2 basis points wider at 42 basis points.
A key focus for markets this week will be the minutes of the Bank of England's latest policy meeting, due out on Wednesday.
Bank of England policymaker David Miles said on Sunday that the Bank still has the firepower to boost the economy and has scope for further stimulus.
"We may need more stimulus ... That will depend on how the headwinds holding back growth play out."
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