No jitters for investors in UK 25-year gilts

Britain sold £2.25bn of 25-year gilts yesterday, drawing strong demand from investors keen to take advantage of the recent rise in yields to an eight-month high.

The sale of 4.25 per cent March 2036 gilts drew bids worth more than twice the amount on offer, well above the 1.62 cover achieved at the last sale of this gilt in 2005.

March gilt futures jumped 15 ticks on the result, outperforming Bund futures.

Britain has suffered none of the auction jitters that have plagued Portugal, Greece and Ireland despite its high public sector deficit and strategists said long-dated gilts looked appealing in the current environment.

The auction came a day after a surprise surge in inflation fanned expectations the Bank of England would start raising interest rates before the summer.

While the prospect of higher interest rates reduces the value of all bonds, it disproportionately hurts shorter maturities.