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Hopes of Conservative majority sees gilts surge as pound recovers

GOVERNMENT bonds saw a small surge in the early hours of this morning on hopes of a Conservative majority that would take decisive action to reduce the deficit.

IG Index’s David Jones said June gilts were trading 0.6 per cent higher, having traded as high as one percentage point up earlier, over fears of a hung parliament.

The government bond markets opened at 1am on London’s futures exchange for the first time due to demand from traders concerned a hung parliament would see prices move against them.

Meanwhile, the pound initially fell from $1.4869 to $1.4736 against the dollar – a fresh one-year low – on fears of a hung parliament.

However, it later recovered its losses as subsequent results pointed towards a sizeable Conservative swing.

The FTSE 100 was today forecast to open 140 points lower at 5,120 with the biggest influence the dramatic movements in US markets last night, rather than the general election.

“The emergence of a minority government would leave some uncertainty about the outlook for economic policy,” said Simon Hayes at Barclays Capital.