LONDON: British 10-year government bond yields approached their highest level in six months on Monday, after prices fell for a sixth day in a global rout driven by expectations that President-elect Donald Trump's policies will boost inflation.
Ten-year yields peaked at 1.491 percent at 1112 GMT according to Reuters data, more than 12 basis points up on the day and a whisker away from the 1.5 percent level that would mark the highest yield since May 5.
"What we have is a buyer's strike in bonds," said Marc Ostwald, fixed income strategist at ADM Investor Services.
Investors were reluctant to buy into what looked like a market set for further falls, while market volatility reduced the amount of stock dealers were able to hold on their books.
Losses were concentrated in maturities of 10 years and longer, with yields up 7 basis points on the day at 1247 GMT, while two-year yields were almost flat on the day at 0.22 percent.
Spreads between two-year and 10-year gilts widened 9 basis points to 1.21 percentage points - the steepest curve since early February.
Ten-year yields have risen by almost a full percentage point since hitting a record low 0.503 percent on Aug. 15, the sharpest sell-off since fears of reduced US Federal Reserve bond purchases triggered 2013's 'taper tantrum'.
Trump's intention to increase US public investment and cut taxes have triggered fears of higher inflation and more debt issuance in bond markets, with US 30-year Treasury yields last week recording their biggest jump since 2009.
Ostwald said fixed-income prices were likely to come under further pressure from British inflation data due at 0930 GMT on Tuesday as well as US price indicators later in the week.
Bank of England Governor Mark Carney is due to speak to a parliament committee on Tuesday morning, and could also trigger a sell-off if he is probed over how the central bank will react if its latest inflation forecasts prove an underestimate.
The BoE raised its inflation forecasts on Nov. 3 to predict consumer price inflation of 2.7 percent in a year's time from 1.0 percent in September, but many in the markets think it could hit 3 percent sooner than that, Ostwald said.
Inflation worries for British bond investors pre-date Trump's election, due to sterling's fall of more than 15 percent to a 31-year low against the dollar since Britain's June 23 vote to leave the European Union.
Index-linked gilt markets expect retail price inflation - which is typically 1 percent higher than CPI - to average 3.19 percent over the next five years.
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