Moody's cut the sovereign rating for Europe's No. 2 economy by one notch to Aa1, citing an uncertain fiscal outlook and deteriorating economy. The move follows a similar downgrade by Standard & Poor's in January and had been widely expected.
"The market implications of the rating action are probably rather limited," Barclays strategist Moyeen Islam said.
At 0850 GMT, the December gilt future was 2 ticks lower at 120.03, lagging the equivalent Bund which was 7 ticks higher.
The underperformance was likely to widen in the run-up to an auction of 4.5 billion pounds of 1 percent gilts due 2017, results of which are due at around 1030 GMT.
"Today's auction will provide an opportunity to buy five-year gilts ... at historically cheap levels," Citi strategists wrote in a note. "The auction bond also looks attractive within the three- to five-year sector as part of a relative value yield fly."
Ten-year gilt yields were almost 1 basis point higher at 1.78 percent. Their spread versus Bund yields was nearly a basis point wider at 43 basis points.
Gilt investors are awaiting the release on Wednesday of minutes of the Bank of England's most recent policy meeting. Market participants also expect a syndicated sale of 0.125 percent 2044 index-linked gilts on Thursday.