Britain will preserve its bond- issuance plans this year to exploit low debt costs and cut sales of Treasury bills instead, as the fastest economic growth since 2010 reduces how much the government needs to borrow.
U.K. government bonds rose, pushing 10-year yields to the lowest level since August, after a U.S. report showing American employers added fewer workers than economists forecast boosted demand for safer assets.
U.K. 10-year gilt yields rose to the highest level since August 2011 after Federal Reserve minutes showed policy makers voiced support for slowing debt purchases this year, damping demand for fixed-income securities.
Investors should buy U.K. gilts with maturities longer than 10 years as their value is less “stretched” than short-dated bonds, and the “galloping pace” of debt issuance will support demand, Royal Bank of Canada said.
Prime Minister David Cameron’s austerity policies, which helped U.K. debt beat world peers in 2011, are backfiring in the bond market with the economy on the brink of a recession and borrowing needs approaching records.