British gilts recover, strong auction
Published May 22nd, 2007
British gilt futures made a tentative recovery on Tuesday, cheered by a well-received auction of 20-year index-linked bonds and firmer overseas debt markets.
Equity market gains and expectations of further interest rates rises in Britain and the euro zone have put bonds under pressure in recent sessions. On Monday, gilt futures touched a contract low and 10-year yields rose to a three-year high.
Nevertheless, there were signs buyers were starting to return. A one billion pound sale of index-linked gilts due 2027 was eagerly snapped up by investors who bid for 2.67 times the amount of paper on offer.
“It was a decent auction, with a healthy premium and strong bid-to-cover ratio,” said Andy Chaytor, rates strategist at RBS Financial Markets.
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