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Economic gloom boosts gilts

Date: Tuesday 09 Feb 2010

Unsavoury economic data spurred demand for UK gilts as investors sought a safe haven.

Poor figures for January was partly due to the bad weather, but also suggested that any recovery could be long and stuttering.

Last month was the worst January for retail sales in 15 years, according to the British Retail Consortium (BRC).

Sales rose just 1.2% year-on-year last month, the least since the survey began in 1995, and fell 0.7% on a like-for-like basis. They had increased by 6% and 4.2 respectively in December.

Chaotic weather brought housing market activity grinding to a halt in January, although prices still increased during the month, the RICS housing market survey found.

Some 20% more estate agents reported a fall in new buyer enquiries rather than a rise at the start of 2010, the first drop in 14 months and down from +18% previously.

With investors keen to buy into the safety of government debt, the yield on a 10-year gilt climbed three basis points to 3.97%.

Mainland Europe is still being plagued by worries over the severe fiscal difficulties faced by Greece and other peripheral European countries.

Greek bond yields fell on speculation a bailout may be on the cards.

But Germany, one of the countries that would bear the brunt of any such bailout, saw its 10-year bund fall in value, with the yield rising by three basis points to 3.17%.

US treasuries gave up a four day winning streak ahead of the sale of $81bn worth of notes.

The yield on a 10-year note was up two basis points at 3.58%.

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