off-the-wire

UK gilt yields rise again after brighter news on economy

Kitco Media
By Reuters
Published:
Updated:
Reuters
LONDON, Feb 22 (Reuters) - Yields on some British government bonds hit fresh four-month highs on Wednesday, a day after a survey of businesses suggested the economy might avoid a long recession and added to bets on further Bank of England interest rate hikes. While the yields on German and U.S. sovereign debt were flat or fell slightly, British gilts yields across the range of maturities rose by around 5-7 basis points on the day. The yields on two- and 30-year gilts hit their highest levels since last October, when British borrowing costs were still elevated after the "mini-budget" tax-cutting plans of former prime minister Liz Truss. Ten-year gilt yields rose 7 basis points to 3.694%, their highest since Dec. 29, while two-year yields peaked at 4.001% and 30-year yields touched a high of 4.065%.


The yield premium offered by 10-year gilts over German Bunds was the widest since Jan. 30 at 110 bps.


On Tuesday, the preliminary "flash" reading of the S&P Global/CIPS UK Composite Purchasing Managers' Index came in stronger than economists had expected, raising hope that Britain could avoid a long recession. On Wednesday, investors were pricing a 99% chance of the BoE raising rates by a further quarter of a percentage point on March 23, after its next scheduled Monetary Policy Committee meeting. Rates are also now seen as most likely to peak at 4.75% later this year, in contrast to many economists' previous expectations that March's rate rise would be the last in the BoE's current tightening cycle.


An


auction on Wednesday of 2 billion pounds ($2.41 billion)of 30-year green government bonds received solid demand, with bids worth 2.42 times the volume on offer, but a yield tail of 0.6 basis points indicated that some lower bids were successful.


($1 = 0.8286 pounds)
(Writing by William Schomberg; editing by David Milliken)

Reuters Messaging: william.schomberg.reuters.com@reuters.net))
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