LONDON: British 30-year gilt prices rose to their highest level in more than two years on Wednesday as investors carried on pouring money into safe-haven assets after a downbeat global economic outlook from the International Monetary Fund.
British government bond prices rose across the range of maturities as riskier assets such as equities fell around the world, with the longest-dated bonds performing most strongly.
The 30-year gilt yield fell to 2.907 percent, its lowest level since August 2012.
By 0838 GMT it had recovered to 2.92 percent, down 5 basis points (bps) on the day.
Ten- and 20-year gilt yields also fell to their lowest level since the middle of last year.
The IMF cut its global economic growth forecasts for the third time this year on Tuesday, warning of weaker growth in the euro zone - with dire German industrial data underscoring that risk.
The subsequent rally in safe-haven government bonds extended through Wednesday, as German government bond yields slipped towards record lows. "(Rising gilt prices) are indicative of a global backdrop that's supportive of core fixed income," RBS strategist Simon Peck said.
The 30-year gilt had been further boosted by Tuesday's sale of the 3.5 percent 2045 gilt, which saw very strong demand, he said. "Obviously there are fundamental factors as well as shorter-term technical factors, but positioning is really being cleaned out now," said Peck, noting a short squeeze on long-dated gilts was adding to upwards pressure on prices. The benchmark 10-year gilt yield was down more than 3 bps on the day at 2.257 percent by 0857 GMT, having 2.244 percent, its lowest level since June 20 last year.
The premium that 10-year gilts offer over the equivalent German Bund tightened about 3 bps shortly after the British market opened to 135.4 bps, its lowest since mid-June, and tightened to just under 137 bps by 0857 GMT.
<Center><b><i>Copyright Reuters, 2010</b></i><br></center>
Comments
Comments are closed.