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LONDON, Dec 21 (Reuters) – The yield on two-year British government bonds fell to a record low on Monday after authorities imposed tougher restrictions to halt the spread of a new, more transmissible variant of the coronavirus.

The yield on two-year gilts – which is sensitive to speculation about Bank of England interest rates – fell as low as -0.161% before recovering to -0.134% at 0840 GMT, down about seven basis points on the day.

Prime Minister Boris Johnson imposed tougher curbs on London and southeast England at the weekend and his health minister said on Sunday that the country “had a long way to go to sort this.”

Several countries in Europe cut transport ties to the United Kingdom, adding to the deep uncertainty facing the British economy ahead of the Dec. 31 deadline for a post-Brexit trade deal with the European Union.

The yield on 10-year gilts fell more than six basis points to as low as 0.171%, its lowest since Dec. 11. Comparable German government bonds fell by less.

Sterling slumped by nearly 2% against the U.S. dollar.

The BoE kept interest rates and its bond-buying plans unchanged last week. It is looking at the feasibility of taking rates below zero for the first time. (Writing by William Schomberg; Editing by Kate Holton)

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