LONDON: Gilts fell in early trade on Monday after US House Republican leaders said they would seek to raise the debt ceiling for another three months, dampening demand for safe-haven assets.
On Friday, US Republicans said the House would consider a bill to raise the US debt ceiling enough to allow the country to pay its bills for another three months, which would buy time for the Democratic-controlled Senate to pass a budget plan that shrinks the federal deficit.
"It will be a very quiet start to the week, allowing markets to digest a very narrow, but still significant defeat for the now outgoing CDU/FDP coalition in the Lower Saxony state elections, and a further "can kicking" exercise by US politicians," said Monument Securities strategist Marc Ostwald.
Germany's centre-left opposition edged Chancellor Angela Merkel's conservatives from power in a regional vote in Lower Saxony on Sunday, reviving its flagging hopes of defeating her in September's national election.
At 0835 GMT, the March gilt future was 7 ticks lower at 116.89, while the equivalent Bund future was 16 ticks lower.
Ten-year gilt yields rose 2 basis points to 2.03 percent, while their spread between Bunds was nearly 2 basis points wider at nearly 46 basis points.
Investors will look towards a slew of British data releases this week, including fourth quarter gross domestic product, public sector borrowing and minutes from the Bank of England's last policy meeting, for further clues on the health of the economy.
"In the UK, inbound data flow will continue to be important to the market's general perception of the underlying momentum in the domestic economy," said Lloyds strategists.
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