LONDON, Nov 2 Reuters British bonds were on track for their best day in more than a month on Thursday and stocks jumped after the Bank of England held interest rates steady for a second consecutive meeting.

Bonds and stocks were already trading higher after the Federal Reserve kept interest rates on hold on Wednesday, with the BoE decision adding to a feeling among investors that the next move in borrowing costs will be down.

Yields on benchmark 10year UK bonds , known as Gilts, fell as low as 4.318 and were last 12 basis points bps lower on the day at 4.381, down around 2 bps from before the BoE decision.

The drop put the yield on track for its biggest oneday fall since midSeptember. Yields fall as prices rise and vice versa.

The BoE left borrowing costs unchanged at 5.25 and published forecasts which showed the British economy was likely to skirt close to a recession and flatline in the coming years.

A fall in global bond yields boosted stocks, with Britain39;s FTSE 100 stock index last up 1.54. The index was 1.2 higher before the BoE decision.

Smaller companies, which are more sensitive to changes in borrowing rates, outperformed their bigger peers, with the UK39;s FTSE 250 index up 3.15.

The news over the last day, from both the Fed and the BoE, indicates that we are done with rate increases, and that decreases are the next item on the agenda, said Michael Field, the Europe market strategist at Morningstar. With this in mind, bond markets once again adjusted….