Bonds: BoE won't cut rates despite weak services PMI, analysts say

These were the movements in some of the most widely-followed 10-year sovereign bonds:

US: 1.82% (-2bp)

UK: 1.43% (-3bp)

Germany: 0.17% (-4bp)

Spain: 1.54% (-3bp)

France: 0.54% (-3bp)

Italy: 1.42% (-4bp)

Portugal: 2.99% (-4bp)

Greece: 9.70% (-21bp)

Japan: -0.10% (+1bp)

Gilts continued to advance on Thursday ahead of Friday's release of the all-important monthly US jobs report, amid bets for increased policy stimulus from the European Central Bank when it next meets and fresh record lows for short-term German government debt yields.

Britain's service sector purchasing managers' index for February retreated from a reading of 55.6 points to 52.7 (consensus: 55.1) - its lowest since March 2013.

That dragged a composite for the construction, manufacturing and services sectors to a level just above that which in the past had seen the Monetary Policy Committee cut Bank Rate, Samuel Tombs, chief UK economist at Pantheon Macroeconomics pointed out.

However, this time was different, Tombs told clients.

The 4.4% drop in the trade-weighted value of sterling since the start of 2016 was equivalent - using the MPC's 'old-rule-of-thumb' - to a 1% cut in Bank Rate

"We think the effect is more modest, partly because many exporters will judge the dip to be short-lived. But we are certain the weaker exchange rate is positive to some extent," Tombs explained, but added that the MPC was unlikely to act as it would interpret the data as a short-lived EU-referendum-induced slowdown.

Euro area service sector purchasing managers' indices came in ahead of forecasts, but were nevertheless to be seen at multi-month lows in February.

Yields on two-year Bunds dropped three basis points to a record low of -0.58%.

Madrid and Paris auctioned €13bn in 10-year sovereign debt on Thursday.

The outturn in Thursday's US ISM services PMI was similarly mixed, coming in at a forecast-beating 53.4 (consensus: 53.1), down from 53.5 in the month before.

However, a sub-index linked to hiring trends in the sector underwhelmed analysts ahead of Friday's critical monthly jobs report.

"The big disappointment is the slump in the employment index to a two-year low of 49.7, from 52.1. At first glance that is a concern because it leaves the index consistent with monthly gains in services payrolls of only 50,000 per month. But we’ve seen this happen with the employment index before," Paul Ashworth, chief economist at Capital Economics said in a research note sent to clients.

All of the above took place as investors in equity markets and foreign exchange markets stepped to the sidelines ahead of the February US employment report.

Lastly, the Caixin China services sector PMI fell back from a reading of 50.1 for January to 49.4.