World Business

UK's debt repayment ability praised by Moody's

By Anchalee Worrachate (China Daily)
Updated: 2010-07-05 10:22

LONDON - UK government bonds posted a second weekly gain as signs that the global economic recovery may be losing steam spurred demand for the safest assets.

The 10-year gilt yield held near its lowest level in 14 months as Moody's Investors Service praised Britain's financial strength and ability to repay its debt. The Debt Management Office sold 30-year bonds through banks this week, raising the most on record for that type of sale. The pound rose against the dollar for a fourth week, the longest streak since March 2008, as reports showed weakness in US manufacturing and housing.

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"Gilts got solid support from an improved credit outlook and the global economic backdrop," said Matteo Regesta, a fixed-income strategist at BNP Paribas SA in London. "There is a sense in the market that interest rates will remain low for a long time. The government has also made good progress with funding, given the sale this week was very well received."

The yield on 10-year gilts declined six basis points this week to 3.33 percent, and reached 3.31 percent on July 1, the lowest since April 2008. The 4.75 percent security maturing in March 2020 rose 0.47, or 4.7 pounds per 1,000-pound face amount, to 111.72 as of 4:40 pm yesterday in London. Two-year note yields rose four basis points to 0.76 percent.

Bloomberg News