LONDON: British government bond prices rallied on Tuesday, pushing down yields on 10-year gilts so they offered the smallest premium over similar German government bonds since Sept. 20, before the announcement of an ill-fated package of unfunded tax cuts.

The yield spread between 10-year gilts and German Bunds dropped by 6 basis points (bps) on the day to 130.2 basis points, its narrowest since Sept. 20 according to Refinitiv data.

Ten-year gilt yields were down 11 bps on the day in outright terms at 3.41%, close to a one-month low.

Britain’s ‘mini-budget’ on Sept. 23 caused gilt yields to soar, pushing 10-year yields as high as 4.63% and the gilt/Bund spread as high as 229 bps, and forced the Bank of England to intervene to stabilise the market.

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Late on Monday, a British finance ministry source said broad-based tax rises were likely to be necessary to stabilise the public finances when new finance minister Jeremy Hunt presents fresh budget plans on Nov. 17.