Bloomberg News

Gilts Little Changed After BOE Maintains Asset-Purchase Target

April 04, 2013

U.K. government bonds were little changed after the Bank of England left its asset-purchase target at 375 billion pounds ($565 billion) and kept its benchmark interest rate at a record-low 0.5 percent.

Sterling fell versus the dollar as the Monetary Policy Committee said it would keep its so-called quantitative-easing program unchanged. The decision was forecast by 34 of 37 analysts surveyed by Bloomberg News. The remainder predicted increases to 400 billion pounds. Bank of England Governor Mervyn King and two colleagues were outvoted by the other six MPC members in February and March in a push for a 25 billion-pound increase in so-called quantitative easing.

“It seems policy makers are still divided over the efficacy of the quantitative-easing program,” John Stopford, head of fixed income at Investec Asset Management in London which oversees $105 billion, said before the decision was announced. “It’s likely that gilt yields will remain low in the near term given the economic backdrop, but as an investor we see little value in gilts at these levels.”

Ten-year gilts yielded 1.76 percent at 12:06 p.m. in London. Rates rose six basis points when the MPC announced no change in policy at its previous meeting on March 7.

Gilts have returned 0.9 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds have gained 0.4 percent and Treasuries have risen 0.1 percent.

Sterling dropped 0.3 percent to $1.5082 and was little changed at 84.92 pence per euro.

The U.K. currency has dropped 5 percent this year, the second-worst performer after the yen among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro is little changed and the dollar has gained 3.3 percent.

To contact the reporter on this story: Anchalee Worrachate in London at aworrachate Neal Armstrong in London at narmstrong8@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net


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