LONDON (Reuters) - British 30-year gilt yields GB30YT=RR fell to their lowest level in eight weeks on Wednesday, extending a rally that started after the UK Debt Management Office unveiled scaled-back issuance plans on Tuesday.
British government bond sales during the coming financial year are set to be the lowest since the financial crisis after finance minister Philip Hammond announced the lowest net public borrowing needs since 2002 on Tuesday.
The planned mix of issuance has also tilted slightly towards short and medium-dated gilts.
DMO chief executive Robert Stheeman told Reuters on Tuesday that Britain is looking to reduce the share of inflation-linked gilts - which tend to be long duration - to lower potential long-run risks to taxpayers.
Thirty-year conventional gilt yields sank to their lowest level since Jan. 18 at 1531 GMT, down seven basis points on the day at 1.822 percent.
Ten-year yields GB10YT=RR were as much as 6 basis points lower at 1.431 percent, the lowest since March 2.
“It’s partly to do with the fact that there’s less duration going on in the market, as there will only be two long and two linker syndications this year, compared with five last year,” RBC fixed income strategist Vatsala Datta said.
Trading flows were also amplifying Wednesday’s move, she added.
Ten-year gilts outperformed German Bunds EU10YT=RR, with the yield spread tightening by as much as 2 basis points to a two-day low of 84.3 basis points.
Short sterling interest rate futures <0#FSS:> for late 2018 onwards were slightly higher - implying a slower pace of Bank of England tightening - although markets still price in a roughly 70 percent chance that the BoE will raise rates at May’s meeting BOEWATCH.
Reporting by David Milliken; Editing by Toby Chopra