Gilts and interest rate futures tracked a rebound on global markets as bonds were lifted by safe-haven demand.

In-line housing data from America also helped to support the firm trend. Existing home sales fell 0.3 per cent to a 5.99 million unit annual rate, the slowest sales pace since June 2003, providing little to lift the gloom surrounding the US housing market.

September gilt futures settled 28 ticks up at 103.62 – finishing off its best levels as European equity markets reversed an opening decline. The contract had earlier traded as high as 103.76.

The short sterling strip was as much as three ticks higher, moving broadly in line with their European equivalents.

Bond trading was more subdued than usual ahead of today’s testimony from members of the Bank of England’s Monetary Policy Committee to a parliamentary body.

Investors are anticipating a July rise in UK borrowing costs after minutes last week showed that four of the nine-member committee, including Mervyn King, the Governor, voted to increase rates this month.

On the supply side, the Debt Management Office will sell £1 billion of 1.125 per cent index-linked gilts due 2037 today. Analysts expect demand for the issue to be robust.

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