U.K. Bonds Decline as Home Prices Increase, Stocks Advance

By Kim-Mai Cutler and Gavin Finch

April 2 (Bloomberg) -- Gilts fell after an industry report showed the country’s home prices unexpectedly climbed last month and as U.K. stocks advanced for a third day, supporting investor appetite for riskier assets.

Government bonds declined as the FTSE 100 Index climbed above 4,000 for the first time in almost six weeks. Nationwide Building Society said today U.K. house prices had their first increase since October 2007. Gilts stayed lower after the government successfully sold 2.25 billion pounds ($3.3 billion) of 30-year bonds.

“U.K. economic news has been quite encouraging,” said Orlando Green, assistant director of capital markets in London for Calyon, the investment-banking arm of Credit Agricole SA. “The way the markets have been behaving is fostering confidence.”

The yield on the 10-year note rose 10 basis points to 3.23 percent by 11:20 a.m. in London. The 4.5 percent security due March 2019 fell 0.89, or 8.9 pounds per 1,000-pound face amount, to 110.74. The 30-year yield rose 10 basis points to 4.20 percent. Bond yields move inversely to prices.

The 30-year bonds sold today were the longest-dated securities offered since the Debt Management Office failed to find enough buyers for 1.75 billion pounds of 40-year bonds last week. At today’s auction, the government agency received 1.59 times as many bids as securities offered, it said.

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Gavin Finch in London at gfinch@bloomberg.net