Gilts jump as UK "agrees in principle" to Norway-style Brexit transition period; investors focus on November employment report

The UK gilts jumped Tuesday after the country "agreed in principle" to a Norway-style Brexit transition period, which means that Britain will welcome all the rules of the European Union without any control to modify them. Also, investors will be focusing on the employment report for the month of November, scheduled to be released on January 24 by 09:30GMT.

The yield on the benchmark 10-year gilts, slipped 1 basis point to 1.35 percent, the super-long 30-year bond yields also fell nearly 1 basis point to 1.85 percent and the yield on the short-term 2-year traded 1 basis point lower at 0.56 percent by 08:45GMT.

The UK has already “agreed in principle” to a Norway-style Brexit transition period in which it accepts all EU rules with no power to shape them, The Independent reported. A key member of the European Parliament’s Brexit team said British negotiators raised no objections to the plans, which would mean accepting free movement and customs union rules, and falling under the European Court’s jurisdiction.

The latest UK Government borrowing figures due this morning are likely to show public net borrowing of around GBP5 billion in December, an improvement on November’s reading due to the usual monthly pattern of tax receipts, which – with three months of the fiscal year to come – would leave borrowing on track to undershoot by a few billion pounds the OBR’s latest forecast (GBP49.9 billion in FY 2017-18). In addition, the January CBI Industrial Trends Survey results, also due this morning, are expected to show firm momentum in the sector thanks to strong recovery in global trade. Nevertheless, a slight softening in manufacturing orders is expected after the headline index rose to the highest level since the late 1980s in the previous two months.

Meanwhile, the FTSE 100 traded 0.13 percent higher at 7,724.50 by 09:05 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 61.69 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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