LONDON: British government bonds strongly outperformed their German counterparts on Thursday after second-quarter gross domestic product data failed to beat economists' forecasts.
Many in the bond market had believed that a recent slew of upbeat British and euro zone data pointed to stronger GDP growth than the 0.6 percent forecast by economists in a Reuters poll, but their expectations proved misplaced.
September gilt futures pared loses sharply and moved into positive territory after the Office for National Statistics reported 0.6 percent growth, outperforming German Bunds.
At 1222 GMT, the gilt future was 2 ticks up on the day at 112.28, compared to a 27-tick decline for the equivalent Bund.
"Evidently there was more fear of a higher (GDP) number than a lower number," said Andy Chaytor, a fixed income strategist at Nomura.
Ten-year gilts' yield spread over Bunds tightened by 3 basis points on the day to 72 basis points - the lowest in more than a week - though outright yields were little changed at 2.39 percent.
There was a stronger performance at the short and long ends of the yield curve, with two-year and 30-year yields both falling by 2 basis points to 0.35 percent and 3.59 percent respectively.
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