LONDON: British government bonds rose early on Tuesday in line with German Bunds after ratings agency Moody's downgraded five of Spain's regions, lifting demand for safe-haven assets.
At 0753, the December gilt future was 26 ticks higher at 118.85, while the equivalent Bund future was 34 ticks up.
"We think that the country (Spain) is bound to ask for sovereign support (but) it is difficult to see it coming as soon as this week," Lloyds strategists wrote in a note.
Moody's cut its ratings late on Monday on Andalucia, Extremadura, Castilla-La Mancha, Catalunya and Murcia, leaving all five on negative outlooks.
On the domestic front, investors prepared for a syndicated gilt sale widely expected later on Tuesday.
The UK Debt Management Office will launch a new 2044 gilt with a 3.25 percent coupon.
Strategists expect the sale to raise between 4 and 5 billion pounds, with pricing around 7.5-9 basis points above the 2042 yield.
Ten-year gilt yields fell 2 basis points to 1.884 percent, with their spread over Bunds 1 basis point wider at 29 points.
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