Bonds round-up: Gilts fall following January deficit

Date: Thursday 18 Feb 2010

Longer-dated gilts have fallen sharply on the back of the news that the UK suffered a budget deficit in January.

January is a time when people pay their tax and this is the first time there has been a deficit in the month since records began in 1993. There was net borrowing of £4.3bn compared with £5.3bn of net lending in January 2009.

Public sector net debt stood at 59.9% of GDP at the end of January compared with 50% at the same time in 2009.

Ten-year gilt yields rose by seven basis points to 4.1%.

Two-year yields were barely changed at 1.16%.

US Treasury bonds are falling following disappointing US unemployment figures.

Initial jobless claims surged to 473,000 in the week ended 13 February, up from the prior week's upwardly revised figure of 442,000, according to the Labor Department. Economists expected a figure closer to 430,000.

The producer price index rose a seasonally adjusted 1.4% in January compared with a gain of 0.4% in December.

Two-year yields are two basis points higher at 0.87%, while ten-year yields are six basis points ahead at 3.79%.

German bunds are also declining and two-year yields are one basis point higher at 1.07%. Ten-year yields are six basis points ahead at 3.26%.

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