A SLOWDOWN in British mortgage lending and a rally in US Treasuries ensured a strong end to the week for UK government bonds.
Gilts initially drew strength from data from the British Bankers’ Association, which said that mortgage lending in May rose by £4.9 billion, against the £6.4 billion increase in April and the average £5.6 billion rise over the past six months. That pattern was confirmed by numbers from the Council of Mortgage Lenders, which also showed a moderation from April’s level.
Those figures served to soothe interest rate jitters, while the release of stronger than expected money supply data, which might have been expected to unsettle gilts, was largely ignored.
That strength was maintained in the afternoon as US Treasuries opened higher once more after a week in which the Federal Reserve had calmed fears of aggressive base rate rises. The end-of-week covering of short positions also played a part, leaving the September gilt future 39p dearer at £105.28 on turnover in 38,000 contracts. Treasury 4 per cent 2009 rose 23p to £95.13, with Treasury 6 per cent 2028 up 64p at £115.50.
With the corporate new issues market subdued, dealers looked ahead to next week’s pricing of a €700 million ten-year bond from Germany’s Kabel Deutschland.