Chosen_One
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U.K. gilts may decline - 2006/10/25 14:55
U.K. two-year bonds may drop for a sixth day after Bank of England Chief Economist Charles Bean said policy makers should "err on the side of caution" to curb inflation.
Two-year yields are at their highest since June 2004 on increasing speculation interest rates will rise twice more in the next six months. Bean's comments may prompt traders to add bets that the central bank will lift its key rate to 5.25% by June, from 4.75% currently.
The yield on the benchmark two-year gilt gained 1 basis point to 5.09% at 1:54 p.m. in London. The price of the 5% security due March 2008 fell 0.02, or 20 pence per 1,000 pound ($1,880) face amount to 99.87. Bond yields move inversely to prices. Ten-year yields also rose 1 basis point to 4.71%.
U.K. consumer expectations on inflation rose this month, adding to the likelihood the Bank of England will raise interest rates, Citigroup Inc. said.
Consumer prices will rise 2.4% in the next 12 months, according to the median response in a survey of 2,162 people by YouGov Plc, up from 2.3% in September, Citigroup said today. Expectations for inflation in the next five to 10 years also increased, to 3.5% from 3.4%.
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