WEAK US homes sales data, doveish comments from the Bank of England’s economist and the expectation of the immediate reinvestment of forthcoming coupon payments helped gilts to advance across the board.
The BoE’s Charlie Bean provided initial encouragement through a newspaper interview in which he said that “normal” interest rates might be a little higher than they are now, although interest rate rises may be more restrained than in the past. Meanwhile, continued support came from the expectation that in the absence of fresh gilt issues the payment of £2.3 billion of coupons on gilts early next month will be immediately ploughed back into the market.
However, it was the US market that provided a brief jolt in the afternoon, as stronger than expected durable goods orders triggered selling of US Treasuries, which pulled gilts down in sympathy. But the effect was shortlived, with investors instead choosing to focus on weaker than expected home sales.
The September gilt future rose 31p at £106.97 in heavy turnover, the bulk of which was provided by the rollover into the December contract. Treasury 4 per cent 2009 added 20p at £96.30, with Treasury 6 per cent 2028 up 64p to £118.22. BNG, of the Netherlands, added £100 million to its 458 per cent 2006 bond.