Gilt yields hit record lows as UK becomes ‘safe haven’

Yields dropped to 2.106 per cent as traders flocked into the relative ‘safe haven’ of the UK gilt market, as the eurozone sovereign debt crisis caused further chaos in European bond markets.

In February UK gilt yields stood at 3.88 per cent. As bond prices rise their yields fall, meaning investors who bought gilts earlier this year have enjoyed capital gains.

Investors are exiting European bond markets after Italian benchmark bond yields have risen past the 7 per cent point this week - a level that is seen as an unsustainable cost of borrowing for the debt-laden government.

In addition, Standard & Poor’s spooked French bond markets yesterday when it put up a statement suggesting it had cut France’s top AAA sovereign credit rating, before admitting the statement was a mistake.