Gilt decline bucks the trend

Date: Tuesday 05 Jan 2010

UK gilts went against the grain Tuesday, posting losses as bonds elsewhere gained on continued economic caution.

Stocks advanced after a weaker start in the UK, with the banking sector continuing its strong start to 2010.

In economic news, construction activity continued falling in December, though the December purchasing manager’s index rose to 47.1 from 47 the previous month. A reading below 50 indicates contraction.

Investors in the UK preferred shares to bonds and the yield on a 10-year gilt climbed by five basis points to 4.02%.

In the US, a bigger than expected fall in home sales jangled nerves. Existing home sales dropped by 16%, compared with expectations of a 2% dip.

The yield on a 10-year treasury was down by three basis points.

Germany’s bund climbed slightly despite the number of unemployed people falling by a surprise 3,000 in December, according to the Federal Labour Agency.

The yield on a 10-year bund fell one basis point to 3.38%.

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