UK yields hit day’s high after patchy demand in 10-year auction

LONDON (Reuters) – British government bond yields spiked higher after uneven demand at an auction of 10-year gilts on Wednesday, a day after U.S. Federal Reserve Chair Jerome Powell said the Fed might speed up its tapering of U.S. bond purchases.

Two-, five- and 10-year gilts all briefly extended gains by around 2 basis points after a sale of 2.25 billion pounds ($3.00 billion) of the 1% January 2032 gilt had an unusually long yield tail of 1.9 basis points.

Yield tails – the difference in yield between the lowest successful bid and the average bid – are normally a few tenths of a basis point at most at gilt auctions, and long tails mean low-ball bids were successful.

Yields for both the two-year and five-year gilt peaked more than 10 basis points higher on the day at 0.603% and 0.725% respectively at around 1005 GMT, while the 10-year yield rose as much as 7 basis points to 0.881%.

Powell’s remarks on Tuesday came towards the end of main trading hours for British government bonds.

($1 = 0.7511 pounds)

(Reporting by David Milliken; Editing by William Schomberg)