U.K. Gilt Yield Stays Near a 16-Month Low on Signs Global Economy Slows

The yield on 10-year U.K. gilts held near its lowest since April last year as signs the global economic recovery is stalling boosted demand for the relative safety of government securities.

Two-year note yields were little changed before a report tomorrow that’s forecast to show consumer-price inflation slowed in July. Japan’s economy expanded at an annualized 0.4 percent rate in the three months to June 30, data showed today, lagging behind the 2.3 percent median economist forecast.

“The Bank of England won’t be able to raise interest rates anytime soon in this environment, and it’s likely to err on doing more rather than less to avoid Japanese-style deflation,” said Mohit Kumar, a fixed-income strategist at Deutsche Bank AG. “Demand for gilts, especially longer-dated maturities, will be underpinned.

The 10-year gilt yield was at 3.12 percent as of 8:30 a.m. in London. The 4.75 percent security maturing in March 2020 rose 0.02 or 20 pence per 1,000-pound face amount, to 113.40. The yield declined to 3.11 on Aug. 12, the lowest since April 1, 2009. Two-year yields were little changed at 0.73 percent.

The yield difference, or spread, between 10-year U.K. gilts and German bunds narrowed to 72 basis points from 73 basis points on Aug. 13.

The pound weakened 0.4 percent against the euro, trading at 82.14 pence from 81.79 pence at the end of last week. It slipped 0.1 percent against the dollar to $1.5580.