The end of a gilded era.......literally

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Gilt Yield Drops to Lowest Since 1989, Pound Plunges on Concern Over Banks
By Matthew Brown


March 9 (Bloomberg) -- U.K. 10-year gilt yields slid to the lowest level in at least 20 years and the pound fell as bank shares tumbled and policy makers prepared to buy government bonds to inject cash into the recession-trapped economy.

Yields on gilts maturing from five years to 30 years dropped after Lloyds Banking Group Plc ceded control to the government and HSBC Holdings Plc sank as much as 14 percent in London trading. The Bank of England said March 5 it plans to spend 75 billion pounds ($104 billion) buying corporate debt and government assets that have between five and 25 years to mature.

“This banking-nationalization talk is keeping banking stocks well depressed and that’s supportive for gilts,” said Orlando Green, a fixed-income strategist in London at Calyon, the investment-banking unit of France’s Credit Agricole SA. “The five- to 25-year part of the curve is going to be well supported given that quantitative easing is going to be centering around the 10-year region.”

The 10-year gilt yield dropped as much as 11 basis points to 2.95 percent, the lowest level since Bloomberg began tracking the data in 1989. The security yielded 3.02 percent as of 12:46 p.m. in London. The 4.5 percent note due March 2019 rose 0.45, or 4.5 pounds per 1,000-pound face amount, to 112.73.

The yield on the security posted its biggest two-day drop since at least 1989 at the end of last week after policy makers also cut the main interest rate on March 5 to 0.50 percent, the lowest level in the bank’s 315-year history.

The U.K. is the first country to start so-called quantitative easing since Japan tried to stimulate its economy in the 1990s by printing money. .........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aHku18_o6dpg&refer=home