LONDON: British government bonds rose early on Tuesday, taking their cue from Bunds as traders focusing on a syndicated sale of new 2052 index-linked gilts expected this session.
Bund futures were boosted by a media report saying lawyers for Germany's central bank were checking the legality of the European Central Bank's bond purchase plan. The report added to investor concern over Spain's reluctance to seek a bailout.
At 0740 GMT the December gilt future was 15 ticks up at 119.62, while the equivalent Bund future was 19 ticks higher.
"It's a combination of renewed safe-haven flows and some positioning ahead of the 2052 linker syndication," said Nick Stamenkovic, fixed-income strategist at RIA Capital Markets.
"Asian equity markets performed pretty sluggishly after a poor performance on Wall Street and that's giving core government bonds a pretty good bid."
Strategists expect strong demand at the syndication, given the concession built into the paper, attractive real yield and technical and flow factors such as index extensions.
Their forecasts of the sale's volume ranged between 2.6 billion and 4.6 billion pounds, and the linker - which carries a 0.25 percent coupon - was expected to be priced to yield 1-3 basis points more than the 2050 index-linked gilt.
Ten-year gilt yields were down 1 basis point at 1.801 percent, with their spread over Bunds a notch wider at 26 basis points.
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