Sector movers: Utilities drop as yield-hunters turn to US debt

29th May 2013 14:46

Every sector in London was either flat or in the red on Wednesday afternoon as concerns about the global economy - following downgrades to growth forecasts from the OECD - sparked a market-wide sell-off.The utilities sectors, which have put in an impressive performance in 2013 so far, were firmly out of favour today, moving in the opposite direction to US bond yields which have surged over the last couple of days.National Grid, SSE, United Utilities and Centrica were the four worst-performing stocks on the FTSE 100 before the close of trade. Centrica, owner of the British Gas energy supplier, was also making headlines today on rumours that it is lining up a potential big for the retail unit of Irish gas firm Bord Gais, which owns 15% of the country's installed wind farms. The deadline for indicative bids for the business is said to be June 12th.US 10-year Treasuries saw the sharpest one-day fall on Tuesday since October 2011, pushing bond yields to a high of 2.23% - their steepest level in 13 months - on speculation that the Federal Reserve could soon start to taper its quantitative easing programme.Following mixed remarks from Fed Chairman Ben Bernanke last week, markets are now beginning to contemplate that the US central bank could soon start to scale back its stimulus measures, especially given the much better-than-expected economic data of the last few days - both home-price figures and consumer-confidence data smashed forecasts yesterday.Rising US yields tend to make high-yielding utility stocks less attractive, as evidenced yesterday when the utility sector Stateside came under heavy selling pressure, "especially after a strong run in the sector together with the unattractive fundamental prospects of utilities on the whole," said Market Strategist Ishaq Siddiqi from ETX Capital."Investors buy utilities in the hunt for yield due to the payout, but US bonds are better placed to offer a better payout, so we are seeking similar trend in UK today," Siddiqi explained to Sharecast.By the end of April, the FTSE 350 gas, water and multiutilities sector had gained around 14%, compared to a 9.0% rise across the FTSE 350. However, the sector is now flat for the month of May, underperforming the benchmark (+3.3%) given the recent rise in bond yields in the States.Top performing sectors so far todayBottom performing sectors so far todayGas, Water & Multiutilities 5,960.17 -4.68%Electricity 9,743.36 -3.73%Technology Hardware & Equipment 1,150.51 -2.59%General Industrials 3,971.26 -2.25%Construction & Materials 3,809.59 -2.23%