UK 10-year bonds record biggest daily gain since March 2020

LONDON (Reuters) - British 10-year government bond prices surged to a four-and-a-half month high on Tuesday and recorded their biggest daily gain since March 2020, when the Bank of England restarted bond purchases early in the COVID-19 pandemic.

Tuesday's rally for gilts came as part of a broader global rise in bond prices which U.S. investors said reflected hopes that the American economy would not overheat as it rebounded from the pandemic.

Ten-year gilt yields plunged more than 8 basis points on the day to 0.635%, their biggest one-day fall since March 23, 2020 and tracking the fall in yields for 10-year U.S Treasuries.

The last time British bond yields fell more was in the days after the BoE announced https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2020/monetary-policy-summary-for-the-special-monetary-policy-committee-meeting-on-19-march-2020 200 billion pounds ($276 billion) of sterling bond purchases on March 19, 2020 to calm turbulent markets and support the economy.

Ten-year gilt yields closed on Tuesday at their lowest since Feb. 18 according to Refinitiv data. Twenty- and 30-year gilt yields also sank to their lowest since late February earlier in the afternoon at 1.128% and 1.158% respectively.

Britain's economy has lagged behind the United States in its recovery, but the BoE has already started to reduce the pace of its bond purchases in line with plans to stop them entirely before the end of 2021.

The British central bank forecasts consumer price inflation - currently 2.1% - will temporarily exceed 3% before long. It says this reflects supply-chain bottlenecks after the pandemic and higher oil prices, as well as comparisons against weak prices during the pandemic a year ago.

(Reporting by David Milliken; Editing by William Schomberg and Emelia Sithole-Matarise)