UK yield curve flattest since Brexit vote on growth fears

LONDON, Feb 11 (Reuters) - The difference in yields between

short and longer-dated British government bonds fell on Monday

to its narrowest since shortly after the 2016 Brexit referendum

on concerns about the weakening growth outlook.

A flatter yield curve is often seen as a signal markets

expect fewer central bank interest rate rises in future.

The yield premium that 10-year British government bonds

offer over two years sank to 43.4 basis points at

0820 GMT.

This was its lowest during main trading hours since the end

of August 2016, not long after the Bank of England launched a

programme of purchases of medium- and long-dated gilts to boost

the economy following the June 2016 Brexit referendum.

At 1210 GMT the spread stood at 44.2 basis points, about

half a basis point flatter than late on Friday.

Earlier, official data showed Britain's economy slowed

sharply in late 2018 and full-year growth was its slowest in six

years as Brexit worries compounded the drag from a weaker global

economy.

Paul Dales, an economist with consultancy Capital Economics,

said British exports will probably continue to slow this year

and next as a result of weaker global demand, even before taking

into account the possibility of a no-deal Brexit shock.

"If there's a silver lining from the mounting signs that the

uncertainty caused by Brexit is holding back GDP growth, it's

that the economy could enjoy a decent rebound if a Brexit deal

is agreed," he said in a note to clients.

The yield curves of other big, rich economies have also

flattened recently on concerns about the slowdown in growth.

Last week, the Bank of England said Britain's economy faced

its weakest growth in a decade in 2019, but interest rates would

eventually resume their rise if a Brexit divorce deal is done.

British 10-year government bond yields fell to

their lowest level since May 2018 last week in response to the

BoE (Shenzhen: 000725.SZ - news) 's new projections, but were up about 2 basis points on

Monday at 1.18 percent.

Mar long gilt future 124.15 (-0.20)

June 2019 short sterling 99.135 (unch.)

Dec (Shanghai: 600875.SS - news) 2019 short sterling 99.050 (-0.005)

10-year gilt yield 1.175 (+1.8 bps)

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UK debt speedguide

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(Reporting by William Schomberg;

Editing by Andrew Cawthorne)