UK gilt investors to keep powder dry until election results

LONDON, May 1 (Reuters) - Investors are unlikely to take big bets on Britain's government bond market ahead of next Thursday's closely fought national election, with opinion polls offering little clarity about the next government.

Gilt prices were little changed on Friday, and strategists said the market would remain in limbo until results of the election come in the early hours of May 8.

Prime Minister David Cameron's Conservative Party remains deadlocked with the opposition Labour party in opinion polls, and strategists saw scant prospect of a breakthrough for either side next week.

"We'll have to wait some time to see what the shape of the govenrment is, whether a coalition government is formed and what polices are pursued," said Nick Stamenkovic, strategist at RIA Capital (Other OTC: CGHC - news) in Edinburgh.

"Until then, investors are largely going to sit on the sidelines and won't take major bets on the gilt market."

Despite the uncertainty, 10-year gilt yields are only about 9 basis points higher than they were around the start of the year.

It took around six days of negotiation after the indecisive 2010 election to form the coalition government. Stamenkovic said a more fractured result next week could produce longer talks, raising the prospect of rising gilt market volatility in the weeks ahead.

Strategists said next week's schedule of economic data, including a closely watched business survey and trade figures, paled into insignificance compared with the election.

At 1453 GMT, the 10-year gilt yield was up around two basis points at 1.85 percent, having fallen earlier in the session after a survey showed lacklustre growth in Britain's manufacturing sector.

The yield spread between 10-year gilts and the equivalent German Bund rose around three basis points to 150 basis points.

June long gilt future 118.17 (+0.05)

June 2015 short sterling 99.41 (+0.01)

Dec (Shanghai: 600875.SS - news) 2015 short sterling 99.25 (unch)

10-year yield 1.84 pct (+1 bps)

-------------------KEY MARKET DATA--------------------------- Long Gilt futures Gilt benchmark chain Short Stg futures Cash market quotes Deposit rates Sterling cross rates UK debt speedguide -------------------KEY MARKET REPORTS-------------------------- Gilts Sterling Euro Debt Dollar U.S. Treasuries Debt reports --------------------GILT STRIPS DATA ------------------------- Gilt strips data All gilt strips Gilt strips IO Gilt strips PO (Reporting by Andy Bruce; Editing by Mark Trevelyan)