UK gilt yields touch new post-Brexit vote highs

(Adds quote, other records, updates prices)

By William Schomberg

LONDON, Oct (HKSE: 3366-OL.HK - news) 28 (Reuters) - Yields on British government

bonds touched their highest levels since the Brexit vote on

Friday as investors discounted the chance of a Bank of England

rate hike next week and pondered the risk of a lot more public

borrowing in the years ahead.

Ten-year gilt yields peaked at 1.312 percent at

1239 GMT, their highest since Britain's June 23 referendum

decision to leave the European Union, and more than 5 basis

points up on the day.

British gilt future prices fell while those for German Bunds

held steady, and the spread between 10-year gilt and

Bund yields widened by 3 basis points on the day to 111 basis

points. If it closes at this level, it would mark the highest

premium investors receive to hold British debt since the

referendum.

The 10-year yield has more than doubled since touching

record lows in August on growing signs that Britain's economy

was coping surprisingly well with the immediate Brexit shock and

expectations of higher U.S. interest rates.

Twenty- and 30-year yields also hit new post-referendum

highs as longer-dated debt underperformed shorter maturities.

With (Other OTC: WWTH - news) investors and most economists no longer expecting a

fresh rate cut by the BoE (Shenzhen: 200725.SZ - news) on Thursday, attention has turned to

the announcement on Nov. 23 by finance minister Philip Hammond

of Britain's first budget plans since the Brexit vote.

"People have got the Autumn Statement at the back of their

minds now," Alan Clarke, a strategist with Scotiabank, said.

He said Hammond might announce next month that public sector

borrowing could overshoot the government's existing targets by

as much as 150 billion pounds ($182 billion) over the next five

years, given the expected Brexit hit to Britain's economic

growth and the likelihood of higher public spending.

Furthermore, Britain's existing deficit-cutting forecasts

looked ambitious even before the referendum, raising the

prospect of an upward revision to borrowing by the independent

budget office when Hammond announces budget plans.

"People are assuming there will be a lot more issuance at

the longer end," Clarke (Toronto: CKI.TO - news) said.

The yields on 20-year and 30-year British government bonds

also hit their highest levels since the referendum on Friday,

touching 1.945 and 1.825 percent respectively, up as much as 8

basis points on the day as they underperformed shorter-dated

debt.

The Office for Budget Responsibility said in March it

expected a British budget deficit of 72.2 billion pounds in the

2015/16 financial year to turn into a surplus of 10 billion

pounds by 2019/20.

Dec (Shanghai: 600875.SS - news) long gilt future 124.88 (-0.27)

Dec 2016 short sterling 99.59 (-0.01)

June 2017 short sterling 99.55 (-0.01)

10-year gilt yield 1.27 pct (+2 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

($1 = 0.8232 pounds)

(Writing by William Schomberg; Editing by Richard Balmforth)