Bloomberg News

U.K. Government Bonds Advance Before Unemployment Report

October 12, 2011

Oct. 12 (Bloomberg) -- U.K. government bonds gained before reports economists say will show jobless claims rose last month while unemployment increased in August, weighing on prospects for economic growth.

The advance pushed the yield on 10-year gilts down for the first time in six days as the FTSE 100 Index declined, stoking demand for safer assets. The pound was little changed versus the dollar and the euro.

“The ongoing flow of poor data points to a weakening recovery,” said John Wraith, a fixed-income strategist at Bank of America Merrill Lynch Global Research in London. “There’s an increasing propensity to own gilts.”

The 10-year gilt yield fell three basis points to 2.55 percent as of 8:24 a.m. in London. The 3.75 percent security due September 2021 added 0.3, or 3 pound per 1,000 pound ($1,559) face amount, to 110.405. Two-year yields were two basis points lower at 0.61 percent.

The pound was less than 0.1 percent stronger at $1.5589 and traded little changed at 87.54 pence per euro. Sterling climbed 0.1 percent to 119.53 yen.

“The market accepts that the growth path in the U.K. will be subdued for some time,” said Chris Huddleston, a trader at Investec Bank Plc in London, which oversees about $95 billion in assets. That may “weigh on the pound,” he added.

Jobless claims increased 24,000 in September after a 20,300 gain in August, according to the median estimate in a Bloomberg survey. The ILO unemployment rate in the three months through August probably increased to 8 percent, the highest since March 2010, a separate survey showed.

--Editors: Matthew Brown, Mark McCord

To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net

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


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