By David Milliken
LONDON (Reuters) – The British government bond market stabilised in early trade on Thursday after its biggest one-day jump since 2009 a day earlier, when global investors ditched all but the safest assets due to fears about the impact of the coronavirus.
The 10-year gilt yield (GB10YT=RR) hit its highest level since Jan. 10 at 0.822% at 0832 GMT, up 3 basis points on the day, but by 0900 GMT it was down 2 basis points at 0.77%.
On Wednesday, when sterling slumped to a 35-year low, the yield jumped by nearly 24 basis points, a daily increase last seen in April 2009, according to data from Refinitiv.
Late on Wednesday, the European Central Bank unveiled a 750 billion-euro asset purchase programme to lift the euro zone economy, which sent German yields down 10 basis points.
Sterling remained close to a 35-year low on Thursday at $1.1550, about a cent higher than its low-point the day before.
The UK Debt Management Office will test international investors’ appetite for British debt later in the morning when it sells 3.25 billion pounds of the five-year benchmark gilt (GB5YT=RR) via auction.
Five-year gilts are usually among the most liquid assets. An auction of 30-year gilts on Tuesday drew solid demand from investors, but the DMO had to accept below-average bids to the greatest extent since an auction in November 2018.
Strategists at Citi said the five-year gilt was looking cheap relative to similar maturities after underperforming versus its German equivalent (DE5YT=RR) over the past two weeks.
At 0851 GMT the yield on the five-year gilt was 3 basis points lower on the day at 0.57%.