Sterling jumps, gilts pare gains after BoE holds policy

LONDON, Sept 8 Thu Sep 8, 2011 7:09am EDT

LONDON, Sept 8 (Reuters) - Sterling hit session highs and gilt futures pared gains on Thursday after the Bank of England kept interest rates unchanged and held off from increasing its asset-buying programme.

The UK central bank was widely expected to leave rates unchanged at a record low 0.5 percent while leaving open the option of restarting its quantiative easing programme.

The announcement prompted short covering in sterling by some investors who had priced in the chance that it may initiate more economic stimulus.

The pound jumped to a session high of $1.6015 after the announcement, from around $1.5970 beforehand. The euro scraped a session low of 87.74 pence.

December gilt futures pared gains by more than 20 ticks after the decision to stand at 129.28, up 25 ticks on the day, having traded at 129.47, up 44 ticks. Short sterling rate futures briefly dipped into the red, having traded around 2-3 ticks higher before the decision. from June 2012 out (Reporting by London Treasury Team)