UPDATE 1-UK 10-year government bond yields hit all-time low

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By David Milliken

LONDON, July 31 (Reuters) – British 10-year government bond yields sank to their lowest on record on Friday, pushing past a level that had held since March as concerns about weak global growth data and a second wave of COVID-19 infections mounted.

Ten-year benchmark gilt yields dropped almost 2 basis points on the day to 0.070%, just below the previous all-time low of 0.074% first struck on March 9 and again on Thursday, according to Refinitiv data.

Five-year gilt yields also hit a record low of -0.153%.

British government debt was trading broadly in line with its German and U.S. peers on Friday, after the country reimposed some coronavirus restrictions on parts of northern England in the face of a regional rise in COVID infections.

Prime Minister Boris Johnson said some lockdown easing planned for the whole of England would need to be delayed too, and the country’s chief medical officer said further opening up of the economy would raise infection rates.

Recent data has shown the United States, Germany and France all suffered record collapses in economic output in the three months to June, and Britain looks certain to follow.

The Bank of England is not expected to change its policy stance next week, after announcing an extra 100 billion pounds ($131 billion) of asset purchases in June.

But Citi fixed income strategist Jamie Searle said yields on gilts with maturities up to 10 years were likely to face further downward pressure if the BoE said any more about the possibility of cutting its Bank Rate below zero.

So too would any expansion by BoE Governor Andrew Bailey on remarks that the BoE – when the time comes to tighten policy – could sell gilts back to the market before raising Bank Rate, Searle added. ($1 = 0.7606 pounds) (Reporting by David Milliken; Editing by Edmund Blair, Kirsten Donovan)

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