At 1126 GMT, the September gilt future was 40 ticks up at 121.25, after earlier peaking at 121.39, the highest since June 1. The Bund contract rose by 26 ticks.
Yields on 10-year gilts -- the strongest performer on the curve -- fell 5 basis points to 1.51 percent while the spread against the equivalent Bund narrowed by 2 basis points on the day to 27 basis points, after peaking at nearly 31 basis points before the auction.
Earlier on Thursday the UK Debt Management Office sold 3.5 billion pounds ($5.45 billion) of 1.75 percent 2022 gilts , with a bid to cover ratio of 2.20.
"It's gone very well, the cover ratio was pretty high. The performance following that has been pretty strong. It fits in with the broader theme we have seen in fixed income over the last few days," said Sam Hill, a strategist at RBC Capital Markets.
Details of a scheme to lower finance costs for banks if they lend more to businesses will be announced by the BoE and the country's finance ministry on Friday.
"It's difficult to know precisely what that scheme design will look like but it will be very closely watched," Hill said.
Short-sterling interest rate futures -- which rise if banks' borrowing costs are expected to fall -- were 5-6 basis points up on the day.
The central bank last week announced a 50 billion pound addition to its asset purchase programme designed to boost growth, offering support to an economy that sank back into recession at the turn of the year
Faced with a stuttering recovery in the United States, the Federal Reserve is open to buying more Treasury bonds to stimulate the economy, but the recovery might need to weaken for a consensus to build, minutes from the central bank's June meeting showed on Wednesday.
"I think the market was a bit disappointed there wasn't a clearer commitment to QE3 if things didn't improve," said Marc Ostwald at Monument Securities.
The Bank of Korea joined the global rush to ease monetary policy on Thursday, cutting its benchmark rate for the first time in more than three years to shield the economy from a global slowdown.
The European Central Bank cut rates to a record low 0.75 percent last week and is likely to follow that up with more measures to help the euro zone economy, possibly including another round of cheap, long-term loans for banks.
Europe, Britain's biggest trading partner, has been battling its own demons but finance ministers outlined an aid package earlier this week for Spain, the euro zone's fourth largest economy, giving it an extra year to reach its budget deficit targets and allaying some fears the contagion would rage on.
But Britain's situation is not as dire as some fear, since private-sector job growth and exports painted a brighter picture, BoE policymaker Adam Posen was quoted as saying on Wednesday.