UK government bond prices head for biggest daily gain in two weeks
TLT•Gilt prices rise as U.S. yields fall
British government bond prices headed for their biggest daily gain in two weeks on Wednesday, as U.S. bond yields fell from close to their highest levels since 2007 after the U.S. Treasury said it would double some liquidity support operations.
Thirty-year gilt yields were GB30YT=RR 5 basis points lower on the day at 5.78% by 1330 GMT while 10-year yields were down 3 bps at 5.04%, both on course for the biggest daily fall in yields and rise in prices since August 4.
The move came after a 10-bp drop in U.S. 30-year bond yields after the U.S. Treasury Department said it would double the size of liquidity support buyback operations for longer-dated nominal coupon securities.
Inflation data and Middle East risks support the market
British government bond prices were also supported on Wednesday by July inflation data which rose broadly in line with expectations and had some softer components which are likely to leave the Bank of England keeping rates on hold for now.
"Although inflation heading higher is undoubtedly uncomfortable, no new news means this shouldn't change the dovish tilt within the Bank of England," Aberdeen investment director Matthew Amis said.
"UK yields will continue to be influenced by the events in the Middle East and the direction of those all-important energy prices," he added.
Financial markets still price in one quarter-point BoE rate hike by the end of the year, although last month Governor Andrew Bailey said he believed such expectations reflected market fears of a deterioration in the U.S. conflict with Iran rather than the most likely path for the central bank.
