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UK gilts soar, boosted by Brexit uncertainty and share falls

LONDON, May 8 (Reuters) - British government bond prices rose to their highest level since April 10 on Wednesday as investors shied away from global stocks and saw reason for caution in Britain after a report that Brexit talks between government and opposition could soon collapse.

The yield on the 10-year gilt , which moves

inversely to the price, hit a low of 1.096 percent at 1025 GMT, just after an ITV reporter said negotiations between the government and opposition Labour Party on a compromise Brexit deal had almost collapsed. It last stood at 1.11 percent, down 5 basis points on the day. Adding to gilts' allure, world shares fell to a five-week low, while there were also technical factors at play, RBC fixed income strategist Vatsala Datta said. She pointed to the difference between the yields of 10-year British government bonds and those of lower-yielding German Bunds, which exceeded 120 basis points on Tuesday, the widest spread since late 2016. By Wednesday, this had shrunk to 116 basis points, as gilts outperformed their German counterparts. "There's basically a grab-for-yield behaviour. I think there was little scope for gilts to keep underperforming," Datta said, citing dovish economic forecasts from the Bank of England last week. Although BoE Governor Mark Carney tried to convince investors on Thursday that they were underestimating how much interest rates could rise in future, markets showed little reaction. On Tuesday, BoE chief economist Andy Haldane said it would be "deeply arrogant" to suggest that the market view was wrong, given the uncertainty around Brexit and therefore the economic outlook. Markets are currently pricing in a less-than 25 percent chance that the BoE will raise interest rates this year.

June long gilt future 128.18 (+0.64)June 2019 short sterling 99.18 (unch)Dec 2019 short sterling 99.095 (+0.025)10-year gilt yield 1.11 pct (-5.2 bps)

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Long Gilt futures Gilt benchmark chainShort Stg futures Cash market quotesDeposit rates Sterling cross rates

UK debt speedguide

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Gilts SterlingEuro Debt DollarU.S. Treasuries Debt reports--------------------GILT STRIPS DATA -------------------------Gilt strips data All gilt stripsGilt strips IO Gilt strips PO

(Reporting by Andy Bruce; Editing by Kevin Liffey)