Bloomberg News

Gilts Decline for a Second Day as U.K. Consumer Confidence Rises

December 20, 2011

Dec. 20 (Bloomberg) -- Gilts fell for a second day as a report showed U.K. consumer confidence unexpectedly rose in November from a record low and rising risk appetite in euro- region debt markets damped demand for safer assets.

The pound climbed to a 10-month high against the euro. An index of sentiment increased to 40 from 36 in October, which was the lowest since the survey began in 2004, Nationwide Building Society said today. A gauge of consumers’ expectations rose 7 points to 55, the Swindon, England-based customer-owned lender said. Ten-year Treasuries and bunds also fell as Asian stocks and U.S. equity futures gained. Credit-default swaps on Spain and Ireland declined.

“Risk markets such as CDS indices and peripheral euro-zone sovereign debt have started the day on a firmer footing, so the yields on the traditional safe havens have risen slightly,” said Brian Barry, an analyst at Evolution Securities Ltd. in London.

The 10-year gilt yield rose five basis points, or 0.05 percentage point, to 2.11 percent at 8:44 a.m. London time, trimming declines this year that pushed it to a record low 2.034 percent on Dec. 16. The 3.75 percent bond due September 2021 fell 0.455, or 4.55 pounds per 1,000-pound ($1,555) face amount, to 114.325.

Two-year yields were also five basis points higher, at 0.37 percent. The U.K. is due to sell 750 million-pounds of 4.25 percent bonds due 2027 at 10:30 a.m.

Gilts Returns

Gilts have returned more than 16 percent this year, including reinvested interest, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds earned 9.4 percent, and U.S. Treasuries climbed 10 percent.

The pound gained 0.5 percent to $1.5574 today. It strengthened 0.2 percent to 83.70 pence per euro after appreciating to 83.60 pence, its strongest level since Feb. 18. The MSCI World Index of shares rose 0.1 percent. The FTSE 100 Index of U.K. shares fell 0.3 percent.

The yield on two-year Italian notes dropped seven basis points to 5.06 percent. The cost of insuring Spanish debt for five years with credit-default swaps fell three basis points to 408 basis points.

--Editors: Matthew Brown, Andrew Reierson

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net

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


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