LONDON: British gilts were little changed early on Tuesday, as uncertainty over the timing of Spain's request for a bailout offset a boost to global risk appetite from a large cash injection into China's money markets.
At 0756 GMT the December gilt future, which tends to be regarded as a safe haven by investors from the euro zone's problems, was 1 tick down at 120.36, while the equivalent Bund was 9 ticks up.
"Asian equities performed quite well led by China, on growing expectations that the People's Bank of China will cut the reserve requirement rate," said Nick Stamenkovic, strategist at RIA Capital Markets.
The main domestic focus for gilts was an auction of 1.75 billion pounds of 4.25 percent 2032 gilts later this session, which strategists said should see decent demand.
Stamenkovic noted that the auction size was relatively small and that the gilt had seen substantial concession in the run-up to the sale, with the spread between 10- and 20-year gilt yields at a record high.
"It should be reasonably well-absorbed, but there are no natural buyers of this sector, so I doubt demand will be spectacular," he said.
Before the auction's results are released around 0930 GMT, Britain will publish industrial output and trade data for August at 0830 GMT.
China's central bank injected 265 billion yuan ($42.15 billion) into its money markets - crucial for domestic growth and by extension for the global economy - via reverse bond repurchase agreements, the second-largest gross injection on record.
The action further strengthened market expectations that the PBOC is unlikely to cut banks' required reserve ratio before the Communist Party Congress opens on Nov. 8.
Ten-year gilt yields were steady at 1.731 percent, with their spread over Bunds unchanged at 26 basis points.
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