Gilts closed lower across the board after a “flight to quality” triggered by the foiled terror plot proved short-lived.
UK government bonds were initially bolstered amid a sharp opening sell-off in the FTSE 100 by switching out of equities into safe-haven assets. However, profit-takers moved in as UK equities narrowed their losses after Wall Street opened higher. Bond markets were also pressurised by US trade figures, which showed a slight narrowing of the trade deficit. Although the deficit, which stood at $64.8 billion in June, remains near its peak, there was relief that the figure was not higher.
The September gilt future closed 15p lower at £109.01 on turnover in 64,000 contracts.
Short-dated maturities extended Wednesday’s trend by outperforming their long-dated peers, with Treasury 4¼ per cent 2011 off 6p at £97.58 and Treasury 6 per cent 2028 down 32p at £122.22.
There was no new issuance in sterling.