Bonds round-up: UK housing slowdown spurs gilts
Further evidence of a slowdown in the UK housing market sent gilts racing ahead today.
Mortgage approvals in the UK fell to their lowest level in almost three years, data from the Bank of England showed Thursday.
New mortgage approvals dropped to 88,000 in October from a downwardly revised 100,000 the month before and from 128,000 the same time last year.
There was also a slowdown in mortgage lending growth to £7.33bn last month from £9.49bn in September, the weakest figure since July 2005.
Earlier today, the latest report from Nationwide revealed that UK house prices fell at their fastest pace in over 12 years in November.
The mortgage lender revealed that prices slipped for the first time since February 2006, dropping 0.8% during the month after a 1.1% gain in October. That takes annual house price inflation down to 6.9% from 9.7% the month before.
Gilt prices advanced strongly, depressing the yield on the 10-year gilt by 9 basis points to 4.59%.
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US Treasuries were also buoyant as traders increased their bets on a half-point slice off US interest rates next month.
Interbank lending rates are on the rise again, signalling increased caution in the credit markets and traders are betting that the Fed will chop interest rates to further ease liquidity problems.
The yield on the benchmark 10-year Treasury note fell back below 4% as it tumbled 8 basis points to 3.96%, as demand was also boosted by news that new home sales in the US during October came in lower than expected at an annualised rate of 728,000, up from a revised 716,000 in September.
The jobless figures also encouraged a switch to safety of government debt. First time jobless claims rose by 23,000 to 352,000 in the week to 24 November, the highest since February.
In comparison, the performance of European bonds was more sedate, as the yield on the 10-year bund fell 4 basis points to 4.07%.
Bund prices were bolstered by news of a slow-down in European retail sales. The Bloomberg purchasing managers index showed a dip in retail sales for the second month in succession, as the index fell to a seasonally adjusted 45.9 in November from 48 in October. A reading below 50 indicates a decline in sales.
