AN unexpectedly aggressive cut in official Swedish interest rates triggered a strong rally in gilts yesterday after a week of downward pressure.
The Riksbank cut interest rates by half a percentage point to a record low of 1.5 per cent, bowing to growing pressure to bolster the Swedish economy and help the jobs market. The cut, which was bigger than economists had expected, fanned speculation that the European Central Bank might move to trim borrowing costs as well.
Roaring demand for a Dutch ten-year bond sale also helped to brighten the mood, with the September gilt future bouncing 57p to close at £112.69, a shade off the £112.71 session high. Treasury 4¾ per cent 2010 added 29p to £102.09, but it was the long end of the market that saw the biggest gains, with Treasury 6 per cent 2028 gaining 76p to £124.28. Dealers said that trading volumes were above average, helped by the recovery in the corporate sector. BAT, SKF and Danish Oil and Natural Gas are all pricing deals this week.