British government bonds mirrored gains in overseas debt markets, as fresh signs of weakness across the pond reassured investors over the interest-rate outlook. Dovish comments from a Bank of England policymaker also provided support, as did a well-received auction of index-linked gilts.
New orders for US durable goods fell 8.3 per cent in October, the biggest drop since July 2000 and double the decline forecast by analysts. That pushed US Treasury yields to their lowest levels since January.
Meanwhile, UK interest-rate futures rallied after Rachel Lomax, the Bank of England Deputy Governor and one of two committee members to oppose the rate rise this month, said that falling oil prices and the strength of the pound had improved the inflation outlook.
On the supply side, a UK gilts auction settled concerns about demand fatigue, with the linker sale due 2027 attracting bids worth 2.28 times the paper on offer. That bolstered confidence before today’s sale by the Debt Management Office of £2.5 billion five-year bonds.
December long gilt futures settled 22 ticks higher at 109.83. In the cash market ten-year gilt yields fell more than three basis points while two-year yields lost just under two basis points.