The Bank of England will hold on to its 375 billion pounds ($630 billion) of U.K. government bonds until at least 2017 as officials maintain stimulus to underpin the recovery, according to Pacific Investment Management Co.
U.K. government bonds snapped a two-day gain after a report showed house prices had their biggest annual increase in 3 1/2 years, adding to speculation the Bank of England will hasten plans to lift interest rates.
The U.K. government’s plan to align future increases in pensions to the consumer-price index measure of inflation rather than the retail-price index may lead to offerings of CPI-linked bonds, Barclays Plc said.
U.K. government bonds declined after a report showed inflation accelerated to a seventeen-month high, prompting Bank of England Governor Mervyn King to write a public letter explaining how prices will be brought under control.
Ten-year gilts rose for a third day as Chancellor of the Exchequer George Osborne said the deficit will drop next fiscal year amid government spending cuts and the Debt Management Office trimmed its bond-sales target.