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Bonds round up: Gilts rise on government debt figures

Date: Thursday 21 Jan 2010

Bonds round up: Gilts rise on government debt figures

Gilts rose sharply, particularly at the shorter-dated end, as Britain’s public sector borrowing leapt to another record in December. The figure turned out to be better than feared, though.

Figures from the Office for National Statistics (ONS) showed public sector net borrowing hit £15.7bn, a new record for the month and nearly £2bn higher than a year ago. A shortfall of nearly £19bn was forecast.

Mortgage lending rose in December for the first time since October 2007. However, the increase in stamp duty at the beginning of 2010 sparked this rise and lending is likely to fall in the next couple of months.

Two-year gilt yields fell eight basis points to 1.25%, while ten-year yields were six basis points lower at 3.95%.

There is good news. Today’s CBI industrial trends survey suggests the manufacturing sector recession may be over as the weak pound has buyers snapping up cheap British goods.

UK manufacturers are more optimistic about exports than at any time since 1995, the report found, with export orders up for the first time since January 2008.

US Treasury bond prices are rising but not as sharply as gilts. Higher than expected unemployment figures and the falling share market are behind the upward movement. Two-year yields are one basis point lower at 0.86% and ten-year yields are two-basis points lower at 3.63%.

US jobless claims jumped to 482,000 in the week ended 16 January, higher than last week's revised total of 446,000.

German bunds were also on the rise. Two-year yields were one basis point lower at 1.135 and 10-year yields were just under one basis point lower at 3.22%.

The Markit preliminary composite purchasing managers index for the 16-nation eurozone slipped to 53.6 in January from 54.2 in December.

Top Greek officials stressed once more that Greece can meet its financing needs and is not seeking aid.

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