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Date: Wednesday 04 Jun 2008

LONDON (ShareCast) - Gilt prices powered forward in the wake of gloomy data on the service sector and a further slump in UK consumer confidence.

The Chartered Institute for Purchasing and Supply/NTC purchasing mangers' index dropped to 49.8 in May from 50.4 the month before. Analysts had predicted a small increase to 50.5.

Today’s number was the worst read since March 2003. A figure of over 50 indicates growth and below that contraction.

Meanwhile, the employment index tumbled to 46.5 from 51, the largest decline since records began almost 12 years ago, and the business expectations index fell to a 6½ year low.

Consumer confidence fell to a four-year low in May, a new report by Nationwide Building Society showed, as jitters about current economic conditions take hold.

Confidence levels fell 1 point to 69 in May, the lowest reading since the index was first published in May 1994, Nationwide said. Confidence levels have been falling since September last year, according to the report.

The gloomy indicators had investors stampeding for the afety of government debt, pushing down the yield on the 10-year gilt 9 basis points to 4.94%.

European bonds also advanced as European retail sales fell by 2.9% in April, triple the rate of decline anticipated by economists.

The yield on the benchmark 10-year bund fell 5 ticks to 4.38%.

US Treasuries were little changed, recovering from a weak opening after equities opened on a stronger note than expected.

In economic news, first quarter non-farm productivity was revised up to 2.6% annual growth versus an initial estimate of 2.2% and expectations for a 2.5% increase.

Unit labour costs for the quarter were left unchanged at 2.2%, up on the 2% anticipated.

Meanwhile, the ADP national employment report revealed a 40,000 rise in private sector jobs last month versus a predicted fall of 30,000.

The yield on the 10-year Treasury note was unchanged at 3.90%.

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