LONDON: Gilts dipped in volatile early trade on Tuesday, tracking global markets while investors looked to a budget update from finance minister George Osborne.
On Sunday, Osborne said he would stick with his deficit-reduction programme when he presents his half-yearly fiscal statement on Wednesday.
That commitment and expectations that gilt issuance in 2012-13 would be revised down were likely to limit falls in gilts.
"In the UK, with little on the macro-data front today, tomorrow's Autumn Statement remains front and centre in investors' minds," Lloyds strategists said in a note.
At 0845 GMT the March gilt future, which has replaced the December contract as the benchmark, was 16 ticks down at 118.73. It came off a session high of 119.04, 15 ticks up on the day. The benchmark Bund was 6 ticks lower.
European shares also yo-yoed and were last positive, with a rise in defensive stocks in the healthcare sector offsetting concerns over a budget stalemate in Washington.
A PMI survey on British construction, due at 0930 GMT, will provide another clue about the health of the country's still struggling economy. The figures are expected to show that activity in the sector expanded modestly in November.
The 10-year gilt yield rose 1.5 basis point to 1.837 percent, with its spread versus the equivalent Bund yield a touch wider at almost 42 basis points.
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