President Barack Obama launched on Tuesday a public relations push for his bid to raise taxes on wealthy Americans, but US lawmakers remained deadlocked over dramatic, year-end tax increases and spending cuts.

Economists warn that unless agreement over the US budget is reached the fiscal cliff could send the United States back in recession and hit the global economy.

"Equity markets dropped amid concerns about the US making making little progress in addressing its fiscal cliff, which now takes centre stage after yesterday's news of an agreement between the 'troika' and Greece," Barclays strategists wrote in a note.

At 0844 GMT, the December gilt future was 37 ticks higher at 119.69.

The equivalent Bund contract was 28 ticks higher, slightly lagging gilts after Tuesday's agreement between euro zone finance ministers and the International Monetary Fund to reduce Greece's debt.

Ten-year gilt yields fell 4 basis points to 1.81 percent. Their spread versus Bund yields was 1 basis point tighter at just under 41 basis points.

With little British news expected on Wednesday, investors will await Thursday's mortgage approvals data. Economists polled by Reuters expected approvals to rise to 51,500 in October from 50,000 in September.