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Edinburgh - Spurred by a post-Brexit economy that’s defying the doomsayers, gilts are not only joining the global government- bond selloff but are leading it.
UK 10-year securities extended their slide today, and lost 1.2% in the week through Thursday, the biggest drop in Bloomberg World Bond Indexes.
Sovereign securities are tumbling globally amid speculation major central banks are reaching the limits of their capacity to inject stimulus.
Gilt yields are now higher than they were when the Bank of England cut interest rates and boosted asset purchases on August 4.
The buoyancy of the UK economy since the June vote to leave the European Union is adding to the bond losses by potentially reducing the need for the BOE to act further.
A slew of reports from services to construction have beaten economists’ forecasts this week. That’s aiding the selloff from a rally that was led by UK debt.
"We’ve seen a paring of positions and profit-taking after a very strong rally in gilts," said Nick Stamenkovic, fixed-income strategist at Edinburgh-based broker RIA Capital Markets.
"The economy has performed in a firmer fashion than many people anticipated post-Brexit, suggesting that fears of an imminent recession are widely off the mark."
The yield on benchmark 10-year bonds rose six basis points, or 0.06 percentage point, to 0.82% as of 11:30 a.m.
London time, the highest since August 2. The 1.5% security due in July 2026 fell 0.565, or 5.65 pounds per £1 000 ($1 330) face amount, to 106.475.
Gilts are still up 16% this year, the most in the world based on Bloomberg sovereign-bond indexes.
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