UK 10-year gilt yields fell to the lowest level in at least 20 years amid evidence Britain’s banking woes are deepening as policy makers prepare to buy government and corporate assets to inject cash into the shrinking economy.
Yields on gilts maturing from five years to 30 years dropped after Lloyds Banking Group sold a majority stake to the government and HSBC Holdings dropped to a 12-year low. The Bank of England said on March 5 it plans to spend £75 billion ($105 billion) on assets that still have between five and 25 years to mature. Lloyds ceded control to the government on March 7 in return for state guarantees covering £260 billion of risky assets.
“This banking-nationalisation talk is keeping banking stocks well depressed and that’s supportive for gilts,” said Orlando Green, a fixed-income strategist in London at Calyon, the investment-banking unit of France’s Credit Agricole. “The five- to 25-year part of the curve is going to be well supported given that quantitative easing is going to centering around the 10-year region.”
The 10-year gilt yield dropped as much as 11 basis points to 2.95 per cent, the lowest level since Bloomberg began tracking the data in 1989. The security yielded 3.02 per cent as of 10:03 am in London.