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Bonds round-up: Gilts rally

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Date: Thursday 01 May 2008

LONDON (ShareCast) - Gilt prices recovered in the afternoon after initially falling back on the release of the Bank of England’s Financial Stability Report, which suggest UK banks may be overestimating the scale of losses by more than half, adding this could hurt any recovery from the current financial crisis.

Estimates of the losses on the banking sector's exposure to sub-prime mortgages have ranged from $400bn to $1trn, suggested by the IMF, but the Bank of England's latest Financial Stability Report cast doubt on the accuracy of some of these.

Gilts picked up as inflation fears receded along with commodity prices; the price of oil declined today while gold hit a new three-month low.

The yield on the 10-year gilt fell 5 basis points to 4.63%.

US treasuries also advanced today, as first time jobless claims in the latest week advanced to 380,000 from 345,000 the week before. The latest figure is the second highest level since 2005.

A further boost to government bonds was given by a slow-down in the growth of personal income. March showed a 0.3% rise in personal income, down from 0.5% in February.

The yield on the benchmark 10-year treasury note fell two ticks to 3.71%.

Mainland European bond markets were closed today for the Mayday bank holiday.