U.K. government bonds advanced, with two-year yields having their biggest two-day decline since June, after a government report showed weekly earnings rose at a slower pace in the three months through March than economists estimated. Derivatives based on the sterling overnight interbank average showed expectations that policy makers will keep borrowing costs unchanged through April 2015.
As recently as yesterday, they showed expectations for an increase in February. U.K. policy makers in their quarterly Inflation Report said while the level of spare capacity in the economy had “narrowed slightly” in the past three months, there “remains scope to make greater inroads into slack before raising Bank Rate.
The pound also dropped versus all against the U.S. dollar as the Office for National Statistics said wages excluding bonuses increased 1.3% in the first quarter, less than the estimate of 1.5%. Jobless claims fell 25,100 in April, versus the 30K decline forecast in a separate survey. The pound fell 0.4% to $1.6767 yesterday after climbing to $1.6996 last week, the highest level since August 2009.
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