By Lukanyo Mnyanda
Feb. 3 (Bloomberg) -- U.K. gilts declined and the pound rose after a report showed consumer confidence improved last month, boosting speculation that the economic recovery is gathering pace.
Two-year gilts snapped a three-day gain after Nationwide Building Society said its index of sentiment climbed 3 points from the previous month to 73, almost double the level measured in the same month last year. The Bank of England will probably keep interest rates unchanged tomorrow and pause its bond-buying program after spending 200 billion pounds ($321 billion), according to Bloomberg surveys of economists.
“If consumer spending continues to improve, the balance may well shift to a more positive outlook and that may lead to higher yields,” said Elwin de Groot, a senior economist at Rabobank Groep in Utrecht, the Netherlands. “The problem is that there’s still too much uncertainty.”
The yield on the 10-year gilt increased 2 basis points to 3.93 percent as of 8:47 a.m. in London. The 4.5 percent security due March 2019 lost 0.16, or 1.6 pounds per 1,000-pound face amount, to 104.29. The two-year yield also advanced by 2 basis points, to 1.24 percent.
The Treasury is scheduled to auction 3 billion pounds of bonds maturing in 2018 today, part of a record 225.1 billion pounds of sales planned for the fiscal year through March.
The pound appreciated 0.5 percent to $1.6051 and strengthened 0.2 percent at 87.21 pence per euro.
Gilts returned 0.8 percent this year through yesterday, compared with 1.5 percent gains for German government bonds and U.S. Treasuries, according to indexes compiled by Bank of America Corp.’s Merrill Lynch unit.
To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
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