UK bond prices soar after US retail sales shock

LONDON: British government bond prices jumped on Thursday after the United States reported the biggest fall in retail sales since 2009, adding to a picture of a slowing global economy and a dovish outlook from the Bank of England earlier.

Benchmark 10-year gilt yields slid by 6 basis points to a nine-month low of 1.122 percent at 1432 GMT, while 20-year yields  dropped by 4 basis ponits to their lowest since August 2017, tracking lower US Treasury yields.

"It was a complete and utter shocker, there are no questions about that," ADM Investor Services' market strategist Marc Ostwald said about the US data, which showed a 1.2 percent fall in December retail sales, the biggest since September 2009.

The numbers followed figures earlier on Thursday that showed Germany's economic growth ground to a halt in December, while Britain's housing market slowed at its fastest rate since 2012.

Ostwald expressed some doubt about whether the slowdown was as steep as shown by the US retail data, which had been delayed by the federal government shutdown and painted a darker picture than retailers and private-sector surveys had done.

"They are so awful, it's not true," he said.

Earlier on Thursday, BoE policymaker Gertjan Vlieghe said he had trimmed his expectation of how fast he thought British interest rates would need to rise to just once a year, due to a slowing world economy and persistent Brexit headwinds.

A year ago, Vlieghe had said he expected rates would need to rise by 25-50 basis points a year to keep inflation in check.

"I feel I can probably wait to see evidence of growth stabilising and inflation pressure rising before considering the next hike in Bank Rate," he added.

Financial markets scaled back their expectations for a BoE rate rise on Thursday and now see less than a 30 percent chance of a move this year - in part due to the risk of a no-deal Brexit.

Prime Minister Theresa May risked another defeat in parliament later on Thursday over her plan to renegotiate the Brexit deal, undermining her pledge to the European Union that, with changes, she could get the agreement approved.