LONDON: British gilt futures fell to a one-week low on Wednesday, trading lower in line with Bunds, as equities rose after data showed new orders for long-lasting US manufactured goods surged in July, easing fears the US economy was slipping back into recession.
The September gilt future settled 83 ticks down on the day at 128.62, slightly underperforming the equivalent German contract. Earlier in the session, the British contract fell to 128.46 -- the lowest level since last Wednesday.
"We are taking our lead from international markets," said Moyeen Islam, strategist at Barclays Capital. "We dropped in line with Bunds... Equities are doing quite well, it seems to be a bit of a risk-on day."
Bunds slid after a 10-year auction drew less than stellar demand due to the ultra-low yields on offer, and they later extended their losses as stock markets rallied.
The yield premium for holding gilts over Bunds was up 4 basis points on the day at around 30 basis points.
Benchmark 10-year gilt yields were 9 basis points up on the day at 2.48 percent.
Investors are awaiting a key speech by US Federal Reserve Chairman Ben Bernanke on Friday, hoping he will provide hints for further measures to revive the struggling US economy.
Friday will also see the release of a second estimate of second-quarter GDP for Britain.
Copyright Reuters, 2011
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