Sterling drops, tracking UK bond yields lower

(Adds details, releads after U.S. data)

LONDON, Jan 30 (Reuters) - Sterling fell on Friday, tracking a drop in 10-year UK bonds yields which were trading near record lows on growing expectations that interest rates in Britain will stay lower for longer.

U.S. gross domestic product data showed the economy cooled in the fourth quarter, pushing down U.S. yields. With doubts over a recovery in the global economy gaining ground and the euro zone still grappling with a slowdown, the Bank of England is expected to keep rates until well into 2016.

Adding to that, growing concerns that a general election in May could throw up a "hung" parliament led investors to sell the pound, especially against the dollar.

Sterling fell 0.25 percent to $1.5025, while it was slightly lower against the euro, with one euro worth 75.20 pence . The 10-year gilt yield dropped below 1.4 percent for the first time ever on Thursday and was trading at 1.35 percent on Friday.

"Even (Taiwan OTC: 6436.TWO - news) though economic data in UK points to growth, investors are wary because there is political uncertainty on the horizon," said Marshall Gittler, Head (Other OTC: HEDYY - news) of Global FX Strategy at IronFX Global Limited.

May's general election looks set to be the closest in modern times, pointing to deep uncertainty over the shape of government and policy thereafter. That is starting to worry investors and keeping them wary of the pound.

Sterling has also suffered in the past six months as investors have pushed back their bets on when the BoE will raise rates.

BoE Chief Economist Andrew Haldane on Wednesday reiterated the message that the BoE was in no rush to raise interest rates and that when hikes do come, they will be gradual, perhaps as little as a half percentage point rise each year.

On Monday, British manufacturing PMI for January will be released and is forecast to show a reading of 52.6, compared to 52.5 a month ago. That is broadly a flat reading with most manufacturers struggling to push up exports. (Additional reporting by Anirban Nag; Editing by Toby Chopra)