LONDON: British government bond prices rose strongly on Tuesday, tracking U.S. Treasuries higher after Federal Reserve Chair Janet Yellen suggested it could be months before the U.S. central bank raises interest rates.
At 1633 GMT the 10-year gilt yield was down around 4 basis points on the day at 1.76 percent, wiping out Monday's rise, with much of the move following Yellen's testimony to U.S. politicians.
The Fed boss said her policy-setting commmitee would start to consider interest rate hikes on a "meeting-by-meeting basis", though she added that a rate increase was not likely for at least the next couple of meetings.
"Gilts are pretty much going hand-in-hand with Treasuries in this latest move, and they're responding to what Janet Yellen is saying," said John Wraith, strategist at UBS.
Bank of England rate-setters, including Governor Mark Carney, appeared before British parliamentarians on Tuesday. Carney urged employers not to use near-zero inflation as an excuse to offer staff low wage settlements.
"Maybe the market had been a little bit nervous about (the BoE testimony), but there was nothing much to worry about and gilts have staged a bit of a relief rally," said Wraith.
Thirty-year benchmark gilt yields fell most sharply, down by 5 basis points on the day at a one-week low of 2.453 percent.
Gilts prices outperformed those of equivalent German Bunds, which fell slightly as signs that a compromise will be reached between Greece and other euro zone countries lifted European stocks.
The spread between British and German 10-year bond yields fell to below 139 basis points, down about 5 basis points on the day and also close to a one-week low.
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