House price slump boosts gilts

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Date: Thursday 28 Aug 2008

LONDON (ShareCast) - UK bonds posted strong gains after house prices fell by the most since 1990.

House prices have tumbled 10.5% in the past year, the first double digit fall since the fourth quarter of 1990, according to the Nationwide.

The data raises the likelihood of interest rate rises, making bonds a more attractive investment and increasing their value.

The yield on a 10-year gilt was down a basis point at 4.5%.

However, there was some cheery data in Germany, where bonds came back as unemployment fell to its lowest level in 16 years.

The yield on a 10-year German bund was up three basis points at 4.2%.

US bonds also fell as the government prepared to sell $22bn of debt.

The yield on a 10-year note was up four basis points at 3.81%.

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