UK gilts gain as investors eye heated U.S. Presidential debate, mortgage approvals at 20-month low

The UK gilts strengthened Monday as investors’ focus switched towards the upcoming U.S. presidential election debate which could prove to be a key changer to the result of November's election. Also, consistent decline in mortgage approvals drove investors to safe-haven buying.

The yield on the benchmark 10-year gilts, which moves inversely to its price, fell 1-1/2 basis points to 0.718 percent, the super-long 40-year bond yield dipped 2-1/2 basis points to 1.316 percent and the yield on short-term 5-year bond slid 1-1/2 basis points to 0.105 percent by 10:40 GMT.

According to Reuters, polls indicate a tightening race between Democrat Hillary Clinton and Republican Donald Trump in a vote shaping up as a major risk event for financial markets. Monday's presidential debate could push U.S. bond yields higher if the candidates hinted at more expenditure or tax cuts, which would increase the federal deficit and borrowing.

According to a Bloomberg poll, Trump and Clinton are evens in a head to head race at 46 percent each. In a 4-way national race, Trump leads by 43 percent to 41 percent for Hillary, Generic House election Democrats 46 percent, 44 percent Republican.

That last result will be put to the test as we get the first of three head to head debates between the two Presidential candidates. The first face-off between Republican Donald Trump and Democrat Hillary Clinton will take place at 01:00 GMT on Tuesday.

Moreover, the British Bankers Association reports that mortgage approvals fell to 69.0k in August from 71.5, representing the third consecutive monthly decline from 77.1k in May.

Meanwhile, the FTSE 100 traded 1.11 percent lower at 6,833.50 by 10:40 GMT.