UK bond yields drop after BoE soothes market with pause in gilt sales
TLT•Gilts rally as longer-dated yields fall
Gilts rallied after the announcement, particularly longer-dated securities, which have been caught up in a global selloff that has pushed yields to multi-decade highs.
Britain’s 30-year bond yield GB30YT=RR was on track for its biggest daily fall since May at 11 basis points (bps), to 5.75%, after earlier this week touching its highest since 1998 at 5.96%.
"Reducing gilt sales and then abolishing totally for the long-end is absolutely a positive," said Mohit Kumar, chief European economist at Jefferies.
"They have effectively changed the supply-demand picture, particularly for longer-dated gilts. That's a positive and that's why gilts are liking it and the long-end is rallying."
Benchmark 10-year yields GB10YT=RR dropped 7 bps while two-year yields GB2YT=RR, which are more sensitive to interest rate expectations, fell 4 bps.
Pound slips as traders keep rate-hike bets
The pound GBP= fell 0.1% against the dollar to $1.335, its lowest level in seven weeks. The FTSE 100 .FTSE was last up 0.5%.
Traders continued to fully price in a rate hike by the BoE this year, with a November increase seen as a 75% possibility and almost four 25-bp increases pencilled in by money markets by the end of 2027.
($1 = 0.7482 pounds)
BoE keeps rates unchanged and pauses gilt sales
LONDON, Sept. 17 (Reuters) - Britain's government bond yields fell sharply on Thursday after the Bank of England kept its interest rate unchanged and said it would pause bond sales under its quantitative tightening programme for six months.
The BoE voted 6-3 to keep interest rates at 3.75%, in line with analysts' expectations. It said inflation would top 4% next year and Governor Andrew Bailey warned prolonged conflict in the Middle East may require higher rates.
