U.K. government bonds rose after a report showed manufacturing grew at the slowest pace in 17 months, while the euro area’s economic slump curbed demand.
Sterling strengthened versus the euro before the European Central Bank announces its rate decision tomorrow amid speculation policy makers will signal they’re willing to provide more stimulus to support a faltering economy. Markit Economics’ Purchasing Managers’ Index fell to 51.6 in September from 52.2 in August, the lowest since April 2013. David Miles, one of the nine members of Bank of England’s Monetary Policy Committee, said yesterday any rate increase will be gradual.
“The U.K. economy might be growing, but recent data suggested things may have petered out a bit,” said Robin Marshall, director of fixed income at Smith & Williamson Investment Management in London. “The euro region’s economy being where it is posts a risk on the U.K.’s. That may delay a rate increase, which will be supportive for gilts.”
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