Pound Falls for Third Day After U.K. Construction Gauge Declines

(Bloomberg) -- The pound weakened after U.K. construction shrank for the first time in 13 months.

Sterling fell for a third day, while gilts rose from their session lows after IHS Markit's gauge of British building activity fell to 48.1 for September, below the median economist forecast for a reading of 51.1. The index was below the key 50 level that separates growth from contraction for the first time since August 2016. U.K. bonds declined alongside other haven securities such as German bunds and U.S. Treasuries.

Tuesday's construction data “was quite a bad miss,” John Davies, an interest-rate strategist at Standard Chartered Bank, said in emailed comments. “Still, gilts are unlikely to sustain a bounce if bunds and U.S. Treasuries remain under pressure.”

Benchmark 10-year bond yields climbed five basis points to 1.37 percent as of 10:09 a.m. in London, after dropping four basis points Monday. Sterling weakened 0.2 percent to $1.3249 having earlier touched $1.3230, an almost three-week low.

Gilt yields climbed 33 basis points in September, the biggest monthly increase since October, on rising expectations for tighter Bank of England policy. At the same time, Prime Minster Theresa May's signaling of a more conciliatory tone in Brexit talks have supported hopes of a smoother exit when Britain leaves the European Union.

To contact the reporter on this story: John Ainger in London at jainger@bloomberg.net.

To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Scott Hamilton