LONDON: British government bonds drifted lower in early trade on Thursday after comments from Bank of England Deputy Governor Charlie Bean signalled a possible end to more bond-buying purchases by the central bank.
Concerns about the outlook for demand are crimping spending and investment, reducing the benefit of the Bank of England's bond purchases on Britain's economy, Bean said on Wednesday.
"While his comments seem to justify the exceptionally loose monetary policy stance so far, it appears that he is increasingly reluctant to provide further stimulus," Barclays strategists wrote in a note.
"He seems sceptical of the effectiveness of QE at boosting demand ... in addition, he appears concerned that by loosening further the necessary adjustments in the economy could be delayed," they added.
Many economists have revised their expectations and don't see further monetary stimulus from the Bank of England after data including a 1 percent rebound in third-quarter gross domestic product signalled the UK economy may be picking up.
At 0846 GMT, the December gilt future was 23 ticks lower at 118.91, underperforming its German counterpart which was 1 tick lower at 141.67.
Investors were awaiting a purchasing managers' survey (PMI)on Britain's manufacturing sector, expected at 0928 GMT, for an indication of economic health into the fourth quarter.
"The manufacturing PMI has been volatile in recent months, but has consistently signalled contraction in the sector since May, and today's reading is likely to continue this theme," said Lloyds strategists in a note.
Britain's Debt Management Office will auction 900 million pounds of an index-linked gilt maturing in 2047, which is expected to see strong demand, according to Barclays strategists.
Ten-year gilt yields rose 2 basis points to 1.880 percent, with their spread over Bunds wider by 2 basis points to 41 basis points.
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