European bonds extended their gains as global oil prices declined. UK government bonds, or gilts, were particularly strong performers. This followed the resignation of the UK Health Secretary, a figure previously seen as relatively market-friendly, a move seen as paving the way for a challenge to Prime Minister Keir Starmer.
The yield on Germany's 2-year government bond fell by 5 basis points to 2.66%, with the yield curve showing a slight bull steepening.
The yield on the 30-year UK gilt, which is most sensitive to political developments, dropped 9 basis points to 5.65%. The yield on the 2-year UK gilt fell 6 basis points to 4.42%.
UK gilts rose for a second consecutive day. The market had stabilized after initial selling pressure earlier in the week, which was triggered by speculation about a potential challenge to Starmer's leadership.
Bank of England policymaker Huw Pill expressed concerns about second-round effects from energy prices.
Market Data: The yield on Germany's 10-year government bond fell 5 basis points to 3.05%. German government bond futures rose 59 ticks to 125.28. The yield on Italy's 10-year government bond fell 7 basis points to 3.78%. The spread between Italian and German 10-year bond yields narrowed by 1 basis point to 73 basis points. The yield on France's 10-year government bond fell 6 basis points to 3.67%. The yield on the UK's 10-year gilt fell 6 basis points to 5.00%.
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