LONDON: British government bond prices fell sharply on Wednesday, tracking German Bunds and US Treasuries lower as investors took profits before this week's highly anticipated European Central Bank meeting.
Long-dated British government bonds performed worst, with the 30-year gilt yield up almost 8 basis points on the day to 3.04 percent at 1533 GMT, putting it on track for its biggest daily rise in more than two weeks.
Traders re-evaluated expectations that the ECB might embark on new quantitative easing to ward off deflation at Thursday's meeting. Doubts as to the ECB's plans drove German government bond and US Treasury yields higher, along with gilts.
Britain's Debt Management Office auctioned 4 billion pounds of a new five-year gilt, which was covered 1.59 times. "The backdrop (for the auction) was relatively supportive," said Simon Peck, strategist at RBS.
"We've got some decent cashflows and coupon events coming next week which is supportive of that five-year sector, so we expect the five-year performance to continue on the curve."
The yield spread between the 10-year gilt and the equivalent German Bund was little changed on the day at 151 basis points. The DMO said it planned no changes to its auction calendar after finance minister George Osborne's announcement that his half-yearly fiscal update
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