Gilt futures held steady above recent lows after tame inflation data from the United States eased concern that the Federal Reserve may have to raise interest rates.

The headline consumer prices index rose by 0.7 per cent in May, a bigger rise than the 0.6 per cent expected. But the more closely watched core rate rose by just 0.1 per cent, below forecasts for a 0.2 per cent rise.

Softer than expected figures on US industrial output, capacity utilisation and consumer sentiment also supported the market mood, although world-wide gains were narrow as traders pooled their cash to chase rebounding equity markets.

The September long gilt future settled down 2 ticks at 103.77, well off its contract lows reached earlier this week. In the cash market, benchmark ten-year gilts were yielding 5.46 per cent, having jumped to nine-year peaks above 5.5 per cent on Wednesday.

Short sterling interest rate futures were one to three ticks lower across the strip, giving back around half the previous session’s gains. Futures prices are fully pricing in expectations that UK rates will reach 6 per cent by the end of the year.

Minutes of the Bank of England’s June meeting, due for release on Wednesday, will provide the next clue to the timing of the bank’s next move.

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