Bloomberg News

U.K. Gilts Little Changed Before Bank of England Decision

October 06, 2011

Oct. 6 (Bloomberg) -- U.K. benchmark government bonds were little changed amid speculation the Bank of England will restart a bond-purchase program to help revive the U.K. economy.

The 10-year yield was higher for a second day as European stocks rallied after German Chancellor Angela Merkel said yesterday she supports recapitalizing European lenders “if there is a joint assessment that the banks aren’t adequately capitalized.” The pound swung between gains and losses versus the euro.

U.K. 10-year gilt yields advanced one basis point to 2.37 percent as of 10:27 a.m. in London. The 3.75 percent security due September 2021 fell 0.115, or 1.15 pounds per 1,000-pound ($1,337) face amount, to 112.155. The two-year note yield was little changed at 0.58 percent.

The pound traded at 86.35 pence per euro and 118.78 yen and strengthened 0.2 percent to $1.5487 versus the greenback.

The Monetary Policy Committee will leave its key rate unchanged at 0.5 percent, according to all 53 economists surveyed by Bloomberg. Eleven of 32 economists surveyed separately predict at least a 50 billion-pound increase in its so-called quantitative easing program.

“There’s a reasonable chance that the Bank of England could do something as early as today,” said Afseth. “If not it’s probably a matter of waiting a month, rather than it not happening. That ought to give a little bit of support to the gilts.”

--Editors: Matthew Brown, Nicholas Reynolds

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.


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