U.K. 10-year gilts posted the biggest weekly gain since 1992 after the Bank of England said it plans to buy medium- and long-maturity bonds to inject cash into the struggling economy.
The increase pushed the 10-year yield to its largest two-day decline the past two days since Bloomberg records began in 1989. The central bank cut the main interest rate to 0.50 percent on March 5 and said it plans to spend 75 billion pounds ($106 billion) on government and corporate bonds over the next three months. The difference in yield between two- and 10-year notes narrowed to the least in almost two months on speculation rate cuts are at an end.
“Longer-dated bonds jumped and outperformed because the market was caught off guard, thinking the Bank of England would focus on shorter maturities,” said Matteo Regesta, an interest- rate strategist in London at BNP Paribas SA. “The Bank of England signaled the rate has reached its trough, and I expect the two-, 10-year spread to narrow further.”
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