Britain’s sale of 10-year conventional gilts drew a lukewarm response on Thursday as worries about global credit conditions curbed investor appetite.

The Debt Management Office said its auction of conventional gilts due 2018 attracted 1.74 times as much in bids as the 2.5 billion pounds on offer. That was much lower than the 2.15 times cover at the last sale of this paper in May.

But financial markets have had a choppy time since then, with worries about the stability of global credit markets buffeting prices of bonds and equities. Those concerns came to the fore again on Thursday after French investment bank BNP Paribas said it had suspended redemptions from three funds because of exposure to the U.S. subprime mortgage market. “Given the current market environment it (the result) was probably to be expected,” said Francis Diamond, strategist at JPMorgan.

There was a 1.6 basis point yield tail at Thursday’s sale, compared with just 0.2 basis point at the last auction in May and more than three-quarters of bids accepted were at the lowest price.

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Posted: 08|9|07 at 4:03 pm. Filed under: Auction News.