UK gilt/Bund yield spread tightest since Sept. 20

LONDON: British government bond prices rallied on Tuesday, pushing down yields on 10-year gilts so they offered the smallest premium over similar German government bonds since Sept. 20, before the announcement of an ill-fated package of unfunded tax cuts.

The yield spread between 10-year gilts and German Bunds dropped by 6 basis points (bps) on the day to 130.2 basis points, its narrowest since Sept. 20 according to Refinitiv data.

Ten-year gilt yields were down 11 bps on the day in outright terms at 3.41%, close to a one-month low.

Britain’s ‘mini-budget’ on Sept. 23 caused gilt yields to soar, pushing 10-year yields as high as 4.63% and the gilt/Bund spread as high as 229 bps, and forced the Bank of England to intervene to stabilise the market.

Europe’s debt market strains force some governments to rework trading rules

Late on Monday, a British finance ministry source said broad-based tax rises were likely to be necessary to stabilise the public finances when new finance minister Jeremy Hunt presents fresh budget plans on Nov. 17.

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