By Matthew Brown and Morwenna Coniam Oct. 21 (Bloomberg) -- The pound rose and U.K. government bonds slid as minutes of the Bank of England’s meeting this month showed the nine policy makers voted unanimously to keep their asset-purchase program unchanged. Sterling advanced to the highest level against the dollar in more than a month and 10-year gilt yields increased by the most since July 23. BOE Governor Mervyn King, writing in an opinion piece published today by Scotland’s Herald newspaper, said rates will rise “at some point” and “it would be wise to take this into account.” The Treasury began selling 50-year bonds, according to a banker involved in the deal. “It has shifted the balance in favor of the Bank of England remaining on hold in November,” said Lee Hardman, a foreign- exchange strategist in London at Bank of Tokyo- Mitsubishi UFJ Ltd. “The pound will go up.” The U.K. currency jumped 1.3 percent to $1.6589 as of 2:14 p.m. in London. Against the euro, the pound strengthened 1.3 percent to 90.08 pence. The yield on the 10-year gilt increased 11 basis points to 3.64 percent. The 4.5 percent security due March 2019 fell 0.90, or 9 pounds per 1,000-pound face amount, to 106.77. The two- year gilt yield also rose 11 basis points, to 0.89 percent. “Gilts have been hit hard,” said David Keeble, head of fixed-income strategy in London at Calyon, the investment- banking unit of Credit Agricole SA. “The minutes are more growth positive than I expected. It doesn’t support the case for an extension of quantitative easing.” ‘Substantial Effect’ Mounting evidence that Britain may be emerging from its recession is raising the prospect of higher interest rates and a pause in the central bank’s debt-buying program. Policy makers hold their next scheduled meeting on Nov. 5. Inflation developments “were not sufficiently compelling to justify revising the target level of asset purchases that had been agreed at the August meeting or to change the level” of rates, the central bank said in the minutes. The bond-purchasing program’s effect on asset prices has been “substantial” and developments in data, equities, bank funding, corporate credit “generally positive,” it said. The economy will grow twice as fast as previously forecast next year, Ernst & Young LLP’s Item Club, which uses the same model as the Treasury, said on Oct. 19. Home sellers London raised asking prices to a record high this month and led gains across the U.K., Rightmove Plc said. Sterling’s rally will be short-lived because the economic recovery will take time to gain traction, according to Brown Brothers Harriman & Co. Short Sterling Futures ‘‘King’s statement that U.K. rates would at some point increase gave no indication that a rate hike would occur any time in the immediate future,’’ Marc Chandler, global head of currency strategy in New York at Brown Brothers Harriman, wrote today in a report. ‘‘The fundamental picture is still negative for the pound.’’ The U.K.’s short-sterling futures contract expiring in March 2010 still climbed 7 basis points to 0.92 percent today as traders raised bets borrowing costs will increase. The pound has risen 14 percent against the dollar this year and 6.3 percent against the euro amid signs of a recovery. The Bank of England this year cut its benchmark rate to a record low of 0.5 percent and committed to buying 175 billion pounds of bonds in an attempt to further lower borrowing costs. The central bank should pause quantitative easing because the economy probably emerged from the recession, the National Institute for Economic and Social Research said today. Gross domestic product may expand 0.7 percent in the fourth quarter after it stagnated in the previous three months, the London- based institute said. U.K. gilts earned investors 3.3 percent from June through yesterday, compared with 1.9 percent for German government bonds and 2.1 percent for U.S. Treasuries, according to indexes compiled by Merrill Lynch & Co.

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