Outlook good for gilts despite drift

GILT prices drifted in thin trading ahead of the publication of bank and mortgage lending statistics for September by the CentralBank. But with the growth in lending coming in below forecasts, the outlook for gilts and for interest rates is good. Losses of almost 50p for the 10-year gilt are likely to be reversed when the market reopens this morning, dealers said.

At the close, 10-year gilts were yielding 6.78 per cent while five-year gilts closed up fractionally on the day, having reclaimed some ground lost in earlier trading. The money market also saw little reason to be concerned about the lending growth figures and one-month rates were unchanged on 5 5/8 per cent.

The overnight 90-point surge on Wall Street failed to generate follow-through gains on European equity markets and the London market closed over 35 points lower as FT-SE futures and British gilts dragged the market lower on interest rate fears.

As a result, there was little impetus to push the Irish market ahead and share prices drifted, dragging the market down a few points. Irish Life - the best performer of the past couple of weeks - succumbed to some profit-taking and lost 3 1/2p to 272p. Vague suggestions that Irish Life's recent rise is takeover-driven have been dismissed by Irish market sources.

Elsewhere it was deadly dull with most of the leaders edging a few pence lower. The only exception was CRH which closed down 6p on 631p as most of the companies in the British building materials sector moved lower.

Tullow lost another 2p to 77p with some investors taking fright at the political situation in Pakistan, where Tullow has some of its most valuable assets. From a high of 122p only a few weeks ago, Tullow has come back a long way and is now at a level where takeover bid talk will resume.