A FURTHER gain in oil prices sent gilt yields down to their lowest level in the current interest rate cycle.
With fresh economic data thin on the ground — the exception being weak signals on the housing market from Hometrack and the British Bankers’ Association — UK government bonds took their cue from the commodity markets, where a further rise in oil prices to above $60 a barrel in New York triggered further fears that higher energy prices will slow economic growth.
The September gilt future gained 38p at £114.34 on above-average turnover in 50,000 contracts. That move sent the yield of ten-year cash gilts down to 4.17 per cent. However, the best gains were had by maturities in the four-year to seven-year range, with Treasury 4¾ per cent 2010 up 20p at £102.93. Treasury 6 per cent 2028 added 70p to £126.61.
The sole new sterling issue was provided by Georgica, the pool hall operator, which sold a £60 million 2012 floating rate note through Royal Bank of Scotland.