Subdued UK factory gate prices enabled gilts to achieve modest gains across the board.
Although domestic producer price input data was strong — taking the annual increase to the highest on record — bond investors took comfort from below-forecast output prices, which fell by 0.2 per cent on a non-adjusted basis between November and December, against economists’ predictions of a 0.1 per cent increase.
Those numbers steadied nerves before today’s eagerly awaited December inflation data and sent the March gilt future up to £115.07 at its highest, before closing 6p better at £114.91. Turnover in just 32,000 contracts betrayed the absence of US investors because of the Martin Luther King Day shutdown. Treasury 4¾ per cent 2010 added 4p to £102.36, with Treasury 6 per cent 2028 up 16p to £132.03. Among sterling issues, Spain’s Instituto de Cré dito Oficial used RBC Capital to increase the size of its 5 per cent 2009 bond by £100 million.