Falling equity markets enabled UK government bonds to finish with modest gains after an early sell-off prompted by stronger than expected domestic house price data.
Gilts were initially spooked by the monthly survey from Halifax, which reported an above-forecast 1 per cent increase in house prices in August. Those numbers were seen as evidence that last month’s MPC rate increase had done little to cool demand, and to raise the chance of further monetary tightening before the end of the year. However, bonds were supported by late-session switching out of equities, leaving the December gilt future 6p higher at £109.82 on turnover in 63,000 contracts. Treasury 4¼ per cent 2011 closed unchanged at £98.10, with Treasury 6 per cent 2028 up 19p to £124.14.
Euro Hypo used Barclays and RBC Capital to add a further £50 million to its 518 per cent 2011 bond. SNS, the Dutch bank, issued a £30 million fixed to floating rate note through JPMorgan.