Bonds: BoE struggles to find enough long-dated Gilts to purchase

These were the movements in the most widely-followed 10-year sovereign bond yields:

US: 1.54% (-5bp)

UK: 0.58% (-3bp)
Germany: -0.08% (-1bp)
France: 0.14% (-1bp)
Spain: 1.00% (+1bp)
Italy: 1.12 (0bp)
Greece: 8.27% (-3bp)
Portugal: 2.80% (-3bp)
Japan: -0.08% (-4bp)

Gilts gained amid a raft of bullish triggers, as the Bank of England failed to meet its target for purchases of bonds with a maturity greater than 15 years on Tuesday.

The Old Lady on Threadneedle Street received offers from investors to sell it £1.118bn worth of long-dated instruments, compared with its target of £1.17bn.

News of the shortfall pushed yields lower. In the previous session, the first day of purchases under its extended programme of quantitate easing, the BoE received 3.63 times the number of Gilts maturing in between three and seven years which it had offered to unburden investors of.

The yield on the benchmark 30-year Gilt finished the day five basis points lower at 1.39% after hitting an intra-session low at 1.36%.

Among the other bullish triggers of the session were the slightly weaker than expected UK manufacturing output figures for the month of June and an estimate from the National Institute for Economic and Social Research that gross domestic product shrank 0.2% month-on-month in July.

Nevertheless, the NIESR was quick to highlight the volatility inherent in monthly estimates, cautioning readers not to draw too many conclusions from the data yet.

Factory production fell at a 0.3% month-on-month clip in June (consensus: -0.2%), ONS said, while estimates for the previous month were nudged slightly lower by government statisticians.

Also worth noting, in remarks to The Times the MPC´s Ian McCafferty said quantitative easing could be bolstered and Bank Rate cut further should recent survey evidence pointing to a weak economy pan out. However, he believed it best to act in a gradual manner.