Weaker than expected US inflation and housing data saw gilts track a rally in American bond markets.
Gilts initially drew strength from an opening dip in equity markets and gains in bunds, which responded to a below-forecast ZEW survey of German economic expectations. But the best gains came in the afternoon on a subdued rise in US core producer prices and the third consecutive monthly fall in new housing starts. The June gilt future rose 48p to £109.82 on turnover in 78,000 contracts. Treasury 4¼ per cent 2011 gained 20p to £97.93, with Treasury 6 per cent 2028 up 124p at £124.03.
Sterling issuance was dominated by tap auctions, with ANZ Bank adding £50 million to its 4½ per cent 2010 bond and EIB increasing the size of its 458 per cent 2054 maturity by £40 million. The Debt Management Office confirmed the size of next week’s auction of Treasury index-linked 1¼ per cent 2055 and 4 per cent 2016 as £700 million and £2.75 billion respectively.