Bonds round-up: Gilts dive on BoE's comments
Government bonds fell sharply for the second day in succession as equity markets continued to rally on the strength of the change in sentiment instigated by the Citigroup cash injection.
UK gilts hit the skids after the Bank of England's deputy governor, Rachel Lomax, warned that the Bank's forecasts of lower interest rates should not be interpreted as commitments.
The BoE's November Inflation Report indicated borrowing costs would need to fall from the current six-year high of 5.75% but since then a number of policy makers have also emphasised the need to control inflation, which usually entails increasing intererest rates.
The yield on the 10-year gilt has risen 8 basis points to 4.67%.
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US Treasuries are also under pressure as investors switched to equities, despite further evidence of difficulties in the US housing market. Sales of previously owned US homes declined in October by 1.2% to an annual rate of 4.97m, the lowest since 1999 when records began.
The 10-year Treasury note's yield climbed 4 basis points to 3.99%.
European government bonds suffered their worst day in a month in the wake of yesterday's rise in German inflation, which has made an interest rate cut in the immediate future most unlikely. The yield on the 10-year bund jumped 7 basis points to 4.1%.
