LONDON: A rally in British government bonds in reaction to recent cheapening maintained some momentum early on Tuesday, but 20-year gilts were vulnerable to further pressure ahead of an auction.
At 0851 GMT, the March gilt future was 7 ticks higher at 116.31, extending a 36-tick gain booked on Monday. Its German counterpart was up 4 ticks.
"After the sharp risk-on moves of last week, yesterday saw some consolidation, with both gilts and Bunds rallying and most stock indices closing in the red. The same theme seems to have continued overnight," said Barclays strategist Hitendra Rohra.
The 10-year gilt yield was steady at 2.09 percent, and its spread over Bunds was also little changed at 57 basis points.
On Friday the yield hit an eight-month high of 2.139 percent after minutes of the Federal Reserve's December policy meeting showed a growing reticence about further increases in the US central bank's $2.9 trillion balance sheet.
Benchmark gilt yields were driven to successive highs throughout last week by a last-minute US fiscal deal, strong economic data and fresh gilt supply.
Later this session, Britain will sell 1.5 billion pounds ($2.4 billion) of 4.75 percent 2030 gilts, with results due around 1030 GMT.
Strategists said the small size of the sale and higher overall gilt yields, as well as some relative value in the paper, should boost demand at the auction.
Some also recommended switching into the 2030 gilts out of 30-year bonds in order to cheapen the latter ahead of a syndicated sale of 2044 gilts in the second half of this month.
Comments
Comments are closed for this article.