New | UK data prompts global bond sell-off as prospect of rate cut dims

Strong growth data in Britain prompted the worst daily sell-off in gilts for months and pushed yields on the world’s benchmark bonds higher on Thursday, as expectations for a Bank of England rate cut fell.

Britain’s 10-year government bond was up 12 basis points to 1.27 per cent, on track for its biggest daily rise since June 2015.

The yield is also now at the highest level since Britain’s June vote to leave the European Union, and it has prompted a sell-off in other major government benchmarks.

German and US equivalents rose to their highest since early June at 0.19 per cent and 1.86 per cent, respectively.

With the market worried that central banks are stepping back from the ultra-accommodative stance of recent years, a reduced chance of a rate cut was enough to push benchmark bonds in Europe and US to their highest level since the Brexit vote in late June.

“The stronger GDP print in the UK has given further weight to speculation that the BoE will not provide further stimulus anytime soon,” said Rabobank strategist Richard McGuire.

“The market reaction to strong data prints has become more dramatic in the wake of speculation that central banks’ modus operandi is changing and they are more focused on the negative effects of unconventional stimulus measures than the benefits,” he said.