LONDON: Yields on short-dated British government bonds fell to a three-month low on Friday, as concerns about the incoming Italian government's fiscal policies boosted demand for high-quality European debt.
Five-year gilt yields dropped 5 basis points on the day to 1.060 percent, while two-year yields were 4 basis points lower at 0.713 percent. Both yields were the lowest since Feb. 23 and tracked a fall in German bond yields.
Ten-year gilt yields were the lowest since March 4 at 1.355 percent, down 5 basis points on the day.
British government bond prices also received support from revised first-quarter gross domestic product data which confirmed a soft picture of growth and weak consumer demand and business investment ahead of Brexit.
"(This) will maintain the Bank of England's current caution over raising interest rates," economist Howard Archer of consultancy EY ITEM Club said. "We expect the Bank of England to lift interest rates ... in August. However, there is a very real possibility that (it) could hold fire until November."
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