LONDON: British government bond prices edged down with German Bunds on Tuesday, despite a well-received auction of 10-year gilts, as demand rose for riskier assets like stocks and peripheral euro zone bonds.
The 10-year gilt yield was last up 2.5 basis points on the day at 2.725 percent, not far off its highest level in almost a month.
Fresh monetary stimulus from the European Central Bank announced last week continued to make its presence felt in global financial markets, with world shares inching towards an all-time high at the expense of major government bonds.
Gilts showed little reaction to data that showed British industry enjoyed its strongest annual growth in over three years in April, or to the auction of 10-year gilts later in the day.
The Debt Management Office's sale of the 2.75 percent 2024 conventional gilt attracted bids worth more than twice the 3.25 billion pounds ($5.5 billion) on offer.
"It went relatively well. The recent cheapening based on a sell-off yesterday enticed buyers' demand for the auction today," said Simon Peck, bond strategist at RBS.
The DMO is scheduled to sell 1.4 billion pounds of the 0.125 percent 2019 index-linked gilt on Thursday.
"There appears to be an auction concession, which we expect to reverse," said Citi strategist Jamie Searle in a note to clients, referring to the way traders sometimes push to reduce debt prices heading into auctions.
"This is particularly true given that after Thursday's auction there will be a five-week break in (linker) issuance until July 17."
The yield premium that 10-year gilts offer over the equivalent German Bund held around 132.5 basis points on Tuesday, not far from a 16-year record set on Monday of 133.2 basis points.
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