Bonds: BoE begins reinvesting funds from maturing Gilts
Long-dated Gilts registered slight gains on Monday as the central bank held the first of the so-called reverse auctions scheduled for the coming weeks to reinvest the proceeds from maturing debt on its books.
The yield on 10-year Gilts was one basis point lower at 1.80%.
Meanwhile, the yield on the benchmark Spanish 10—year government bond jumped by seven basis points to 2.14%. Market commentary attributed the move to investors’ desire to price-in the result of the next general elections in December.
Beforehand, on 27 September, regional elections widely billed by nationalists as a plebiscite for independence were due to be held in the north-eastern region of Catalonia.
The yield on similarly dated Italian 10-year bonds edged higher by two basis points to 1.9%, leaving the spread between both instruments at its largest since August 2013.
Date released on Monday by the European Central Bank revealed that the ECB’s asset buying slowed in August to €51.6bn, the least since the start of the ECB’s programme of quantitative easing, to a summer lull in issuance.
German government bond yields finished the session flat at 0.67%.
US markets remained closed on Monday in observance of Labour Day.
Acting as a backdrop, investors were keeping a close bead on events in China and any signs that capital out-flows might be leading to tighter financial conditions.
China’s US dollar reserves declined by $93bn in August, somewhat more than had been expected, new data revealed.