Pound advances vs. dollar as BOE maintains bond-buying target

Asset Purchases

The Bank of England will increase its asset-purchase target by 50 billion pounds in November because U.K. growth is “unlikely to improve,” James Knightley, a senior economist at ING in London, wrote in an e-mailed comment.

U.K. house prices fell for a third month in September and will probably remain little changed into 2013 as the uncertain economic outlook constrains property demand, according to Halifax, the mortgage unit of Lloyds Banking Group Plc.

Fitch Ratings said Sept. 28 that U.K. government debt will peak at a higher level and later than it previously predicted. The company affirmed Britain’s AAA credit level and kept the nation on negative outlook, adding that it doesn’t expect to resolve the question mark hanging over the top grade until 2014.

Fiscal Credibility

“Growth is still elusive,” John Wraith, a fixed-income strategist at Bank of America Merrill Lynch in London, said in an interview today on Bloomberg TV’s “Countdown” with Mark Barton. “It means the triple-A rating and the fiscal credibility coming into question. The danger of the U.K. losing its rating is growing. Appetite for gilts may start to wane.”

The 10-year gilt yield was two basis points, or 0.02 percentage point, higher at 1.71 percent, after climbing as much as five basis points, the most since Sept. 21. The 1.75 percent security due in September 2022 dropped 0.18, or 1.80 pounds per 1,000-pound face amount to 100.395.

Gilts returned 3.5 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 3.2 percent and U.S. Treasuries earned 2.4 percent.

Bloomberg News

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