U.K. government bonds rose as a measure of house prices slid to a 16-month low, adding to speculation the Bank of England will resume buying securities to avert another recession.
Gains earlier today pushed the two-year note yield to within three basis points of a record low. The number of real- estate agents and surveyors saying prices fell exceeded those reporting gains by 36 percentage points, widening from the 32- point gap in August, the London-based Royal Institution of Chartered Surveyors said in an e-mailed report today. Investors added to bets interest rates will stay lower for longer after a report showed inflation stagnated last month.
“We’ve had some weak data, so that’s been gilt-market friendly,” said Nick Stamenkovic, a fixed-income strategist in Edinburgh at RIA Capital Markets Ltd., a broker for banks and money managers. “The market is banking on more quantitative easing from the Federal Reserve, and the Bank of England may follow suit next year.”
Ten-year yields fell four basis points to 2.84 percent as of 1:42 p.m. in London. The 4.75 percent security due March 2020 rose 0.33, or 3.3 pounds per 1,000 pound ($1,586) face amount, to 115.66. The two-year yield was little changed at 0.63 percent after falling to as little as 0.58 percent. The two-year yield dropped to a record low 0.56 percent on Aug. 24.
The pound strengthened 0.1 percent to 87.31 pence per euro and was 0.3 percent weaker at $1.5833.
Retail Sales
A report from the British Retail Consortium released today showed stores posted slower sales growth in September. Retail sales by value rose an annual 0.5 percent, compared with a 1 percent increase in August. Nationwide Building Society will probably say tomorrow that consumer confidence declined last month, according to a survey of economists.
U.K. consumer prices rose 3.1 percent from a year earlier, the same as in August, the Office for National Statistics said today in London. Prices were unchanged from a month earlier, when they increased 0.5 percent.
Britain’s inflation rate has been above the central bank’s 3 percent limit since March as higher commodity prices feed price pressures in the economy. Sterling has fallen by about a fifth on a trade-weighted basis since the start of 2007, contributing to higher import costs.
Bank of England officials are split between those advocating higher rates to bring inflation back to its 2 percent target against those who favor looser policy as a way to safeguard the recovery while the government cuts spending.
‘Worst-Case’
“The worst-case scenario for sterling would be a sense in the market that as the economic data worsens, the Bank of England is in a position where it’s not able to respond with further policy measures because of the inflation,” Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an interview with Andrea Catherwood on Bloomberg Television’s “The Pulse.”
Policy maker Adam Posen said last month the bank should resume gilt purchases to bolster the economy. His colleague, Andrew Sentance, has argued since June that the recovery is strong enough to withstand measures to tame price gains.
The yield on the short sterling futures contract for December 2011 fell 4 basis points to 1.01 percent.
The Bank of England’s nine-member Monetary Policy Committee, led by Governor Mervyn King, held the target for bond holdings at 200 billion pounds last week and kept the benchmark interest rate at a record low of 0.5 percent.
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Gains earlier today pushed the two-year note yield to within three basis points of a record low. The number of real- estate agents and surveyors saying prices fell exceeded those reporting gains by 36 percentage points, widening from the 32- point gap in August, the London-based Royal Institution of Chartered Surveyors said in an e-mailed report today. Investors added to bets interest rates will stay lower for longer after a report showed inflation stagnated last month.
“We’ve had some weak data, so that’s been gilt-market friendly,” said Nick Stamenkovic, a fixed-income strategist in Edinburgh at RIA Capital Markets Ltd., a broker for banks and money managers. “The market is banking on more quantitative easing from the Federal Reserve, and the Bank of England may follow suit next year.”
Ten-year yields fell four basis points to 2.84 percent as of 1:42 p.m. in London. The 4.75 percent security due March 2020 rose 0.33, or 3.3 pounds per 1,000 pound ($1,586) face amount, to 115.66. The two-year yield was little changed at 0.63 percent after falling to as little as 0.58 percent. The two-year yield dropped to a record low 0.56 percent on Aug. 24.
The pound strengthened 0.1 percent to 87.31 pence per euro and was 0.3 percent weaker at $1.5833.
Retail Sales
A report from the British Retail Consortium released today showed stores posted slower sales growth in September. Retail sales by value rose an annual 0.5 percent, compared with a 1 percent increase in August. Nationwide Building Society will probably say tomorrow that consumer confidence declined last month, according to a survey of economists.
U.K. consumer prices rose 3.1 percent from a year earlier, the same as in August, the Office for National Statistics said today in London. Prices were unchanged from a month earlier, when they increased 0.5 percent.
Britain’s inflation rate has been above the central bank’s 3 percent limit since March as higher commodity prices feed price pressures in the economy. Sterling has fallen by about a fifth on a trade-weighted basis since the start of 2007, contributing to higher import costs.
Bank of England officials are split between those advocating higher rates to bring inflation back to its 2 percent target against those who favor looser policy as a way to safeguard the recovery while the government cuts spending.
‘Worst-Case’
“The worst-case scenario for sterling would be a sense in the market that as the economic data worsens, the Bank of England is in a position where it’s not able to respond with further policy measures because of the inflation,” Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an interview with Andrea Catherwood on Bloomberg Television’s “The Pulse.”
Policy maker Adam Posen said last month the bank should resume gilt purchases to bolster the economy. His colleague, Andrew Sentance, has argued since June that the recovery is strong enough to withstand measures to tame price gains.
The yield on the short sterling futures contract for December 2011 fell 4 basis points to 1.01 percent.
The Bank of England’s nine-member Monetary Policy Committee, led by Governor Mervyn King, held the target for bond holdings at 200 billion pounds last week and kept the benchmark interest rate at a record low of 0.5 percent.
http://jodnet.blogspot.com
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