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Bonds: UK gilt auction depresses prices

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Date: Thursday 17 Apr 2008

LONDON (ShareCast) - UK gilt prices fell sharply today as the UK Debt Management Office announced that its issue of £2.25bn of treasury stock maturing in 2042 was covered 1.69 times by bids.

The yield on the benchmark 10-year gilt climbed 12 basis points to 4.65%.

Government debt was also out of favour in mainland Europe and the US.

US treasury notes retreated as hopes of further interest rate cuts by the Federal Reserve diminished. Sentiment was further turned against fixed income securities by the US index of leading indicators, which showed its first rise in half a year when it advanced 0.1% in March.

The yield on the 10-year note moved up 4 ticks to 3.72%.

European government bonds fell for the third day in succession, with the yield on the 10-year bund rising 5 basis points to its highest level in six weeks at 4.08%, as inflation fears took hold.

The HICP annual inflation rate in the euro zone climbed to 3.6% in March, a level not seen since the early nineties.