Rebounding equity markets led bond prices to reverse early strength and drift lower, with gilts underperforming European peers as support from coupon money entering the market dwindled.

A slow day for data resulted in thin trading. Investors were also reluctant to take fresh positions ahead of tomorrow’s United States nonfarm payrolls report for May.

US data yesterday indicated that the key jobs report will come close to expectations. Payroll services firm ADP reported that the US economy added 97,000 private sector jobs in May, suggesting nonfarm payrolls grew by about 121,000 – just shy of market expectations for a 138,000 increase.

June long gilt futures settled 9 ticks lower at 105.63, having earlier touched a new contract low of 105.56. In the cash market, yields on ten-year gilts were steady at 5.22 per cent, outperforming longer-dated securities ahead of new supply entering the market next week. The Debt Management Office will auction £2.25 billion of a new 35-year conventional gilt on June 5.

Today should provide a more lively session: the Bank of England’s April mortgage lending and consumer credit figures are due for release, along with Nationwide’s house price survey for May.

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