By 1155 GMT the September gilt future was 35 ticks down at 121.53, having settled 78 ticks up on Tuesday.

The contract temporarily pared losses after the latest PMI survey showed that Britain's manufacturing sector shrank at its fastest rate in more than three years in July.

"Coming on the back of the GDP number last week, it confirms quite a material contraction in expectations for the economy," said Sam Hill, strategist at RBC Capital Markets.  He added that he still did not expect the Bank of England to opt for a change of policy at the conclusion of its monthly meeting on Thursday, noting that it would probably want to see the effects of the new Funding for Lending Scheme before announcing additional measures.

Investors are also biding their time ahead of the Federal Reserve's monthly policy decision, due after market close on Wednesday. The US central bank is expected to signal that it is ready to act against a weakening US economy but stop short of aggressive measures for now.

In addition, speculation is rife as to what the European Central Bank will do when it meets on Thursday after ECB President Mario Draghi said last week the bank would do whatever it takes to preserve the euro.

His comments sparked a rally in riskier assets but expectations of bold moves to bring down borrowing costs for Spain and Italy have moderated after German policymakers reiterated their opposition to the ECB buying up bonds.

"The market is going to be lost for direction until we are through all the central bank meetings this week ... The ECB is the focus," Hill said.

Strategists said gilt prices should remain propped up over the next three weeks by a lack of gilt issuance, combined with continued gilt purchases by the Bank of England.

In the cash market, 10-year gilt yields rose 3 basis points to 1.50 percent, with the spread against Bunds 4 basis points tighter at 15 basis points.

Bund futures were 88 ticks down, weighed down by profit-taking and an auction of five-year German debt.