A sale of UK benchmark bonds attracted the strongest demand in more than two years, as investors brace for an end to the Bank of England’s monetary tightening cycle.
(Bloomberg) — A sale of UK benchmark bonds attracted the strongest demand in more than two years, as investors brace for an end to the Bank of England’s monetary tightening cycle.
Bids for 10-year notes outnumbered the £3.25 billion offer by more than three times on Thursday, a ratio not seen since October 2020. That follows a sale of 30-year UK notes last month that saw the strongest demand in ten months.
“It’s encouraging to see good demand for gilts,” said Antoine Bouvet, a senior rates strategist at ING Groep INV. The fact that bonds have shed a lot of signs of stress since last year’s mini-budget turmoil, combined with confidence that central banks are close to stopping raising rates, is making gilts “look good,” he added.
Bouvet noted a further fillip was the higher yield on the UK 10-year bond compared to its US peer, at 3.58% versus 3.42%, respectively, at 10:42 a.m. in London.
Money markets are betting the BOE will lift interest rates by a further half-point at most to nearly 4.75%, a far cry from the 6.25% rate that was priced in the aftermath of last year’s mini-budget turmoil.
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