Sponsored by Digital Look Events

Bonds round-up: Gilts rise despite rate cut doubts

News for Spread Betters

PreviousPrevious
NextNext

There's a new Investor Edition of CMC Markets' spread betting platform... and it's exclusive to DigitalLook.com users...

Get full details about Marketmaker:Investor Edition here. Advertisement

Date: Wednesday 23 Apr 2008

LONDON (ShareCast) - Gilts made headway today despite the release of the minutes from the last meeting of the Bank of England's Monetary Policy Committee (MPC), which showed two members were opposed to the central bank’s recently announced rate cut.

The MPC voted 6-3 to cut interest rates by a quarter-point this month. Many had expected a unanimous vote in favour of a cut and experts say the news cast doubt on speculation of another reduction as soon as next month.

Six committee members, including Bank of England governor Mervyn King, voted for a reduction to 5%, while David Blanchflower called for a bigger cut and Andrew Sentance and Timothy Besley wanted no change due to inflation pressure from soaring oil costs.

Despite this, gilt prices rose, pushing the yield on the 10-year gilt down 2 basis points to 4.66%.

In the US, prices of two-year notes were little changed ahead of the government’s sale of $30bn of two-year securities. Prices at the longer end of the market fell, pushing the yield on the benchmark 10-year note up 3 ticks to 3.72%.

European bond prices eased slightly, as central bank official Christian Noyer claimed his comments the previous day about the bank’s willingness to raise rates to combat inflation had been misinterpreted.

“I would never engage in a discussion about the future path of interest rates, simply because nobody knows,'' Noyer said in an interview with the Wall Street Journal.

The yield on the 10-year bund dipped one basis point to 4.13%, while the two-year bund’s yield fell 4 BPs to 3.87%. The two-year bond is more sensitive to changes in the central bank’s key interest rate.