GILTS bounced back towards their recent highs on gains in continental European markets and weak US economic data.
UK government bonds initially came under pressure from overnight comments from Richard Lambert, an MPC member, which served to dampen this week’s expectations of an imminent rate cut. Mr Lambert noted the slowdown in consumer spending, but also pointed to inflationary pressures from import prices.
However, with the session under way, gilts paid greater heed to a rally in German bunds, a stronger oil price and weaker equities. Those gains were extended in the afternoon on data showing a fall in May for non-defence US durable goods orders excluding aircraft.
The September gilt future came to rest 29p better at £113.74 on turnover in 55,000 contracts. The yield on ten-year paper in the cash market fell to 4.22 per cent. Treasury 4¾ per cent 2010 added 10p to £102.73, although longer-dated maturities did better, with Treasury 6 per cent 2028 up 79p to £125.92.