The Government bonds of UK went ahead, however the 10-year yields experienced the biggest drop of this year. The investors are speculating that the Bank of England will increase its asset purchase program to shake the currently stalled economy. The major currency of United Kingdom, sterling however jumped higher from a 15-month low value against Euro. Incidentally, as the Federal Reserve signaled that the pace of its bond buying program may be slowed down, Sterling was affected badly and went down to its weakest value since July, 2010. Incidentally, in this month’s meeting, more of the policy makers of the Bank of England voted for boosting stimulus, in comparison with how many wanted this to happen in January. Incidentally, 10-year gilts were auctioned by the UK Government on today.
Sam Hill, the fixed income strategist for Royal Bank of Canada stated that the risk of a possible price insensitive Central Bank buying was less before, but no more after the minute details of the last meeting were released. Sam added that bunds are catching up on the risk-off tone and this will ensure a lot of moves in near future.
The 10-year British gilts went down by 9 basis points and are currently at 2.11%. These, at one point of time today, dropped by 10 basis points, marking the biggest decline since 28th November. On the other hand, the 1.75% bond which is due by September, 2022 increased by 0.72 and is now at 96.925.
Today, an additional 2.25 billion Pounds of the benchmark 10-year gilts were sold by the Debt Management Office, at an average yield of 2.147%, which was the highest in last 10 months. The 10-year bonds were sold on 22nd January last and at that time, the average yield was set at 1.897%.
Sterling is currently priced at $1.5261 after experiencing an increase of 0.2%. It went down to $1.5132 at one time, marking the lowest value since 21st July. Against Euro, Sterling has surged ahead by 0.6% and is priced at 86.68 pence per Euro now. Only yesterday, it was at 87.65 Pence per Euro, the lowest in 16 months.
According to Credit Suisse, pound may get further declines against the greenback if it breaks through a particular key level of support. It can actually get to $1.4856 by end of this year, according to Credit Suisse.