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Bonds round-up: Sluggish GDP growth hits gilts

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Date: Friday 25 Apr 2008

LONDON (ShareCast) - UK growth slowed to a three-year low in the first quarter of 2008 as the credit crunch proved a drag on the financial services sector. Gilts responded by easing back, pushing the yield on the benchmark 10-year gilt one basis point higher to 4.79%.

The UK economy grew just 0.4% in the first three months of the year, down on the 0.6% reported for the previous quarter, but in line with most economists’ expectations.

The Office for National Statistics numbers represent the slowest quarter-on-quarter growth since the start of 2005 and now reside below the long-term average, estimated at 0.6-0.7%.

Annual growth dropped to 2.5%, less than the 2.8% reported for the quarter before and weaker than the 2.6% experts had predicted.

European government bonds were little changed in thin trade, having opened weaker. Sentiment was boosted in the afternoon by release of the Reuters/University of Michigan index of consumer sentiment, which fell to 62.6 in April, from March’s 69.5.

US treasuries fell back despite the bad news on the consumer sentiment front, with the yield on the 10-year treasury note moving up 3 ticks to 3.86%.