U.K Gilts gain on weak service PMI amid Brexit angst

The U.K government bonds strengthened Thursday after the data showed weaker-than-expected service PMI figure amid rising worries among investors about the up-coming June referendum. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 2bps to 1.505 pct and the yield on the 2-year bonds dipped 2bps to 0.446 pct by 1040 GMT.

The United Kingdom April services sector PMI fell to 52.3 (lowest since Feb 2013), below the market consensus of 53.5, as compared to 53.7 in March. The instability encompassing the EU choice has begun to take a toll on general economic activity, with the risk now that second quarter growth eases back to close stagnation.

Yesterday, the United Kingdom April construction PMI declined to 52 (nearly 3-year low), against market expectation of 54, from 54.2 in March. Moreover, the British bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of England's target. Today, Oil prices jumped by more than 2 pct in early trading on Thursday as a huge wildfire in Canada disrupted its oil sands production, while escalating fighting in Libya threatened the North African nation's output. The International benchmark Brent futures rose 2.49 pct to $45.70 and West Texas Intermediate (WTI) climbed 3.17 pct to $ 45.17 by 0900 GMT.

In a new EU referendum poll by ICM published in the Sunday Sun, the Brexit side leads by 46 pct to 43 pct and remaining 11 pct are still undecided. While 45 pct said that immigration in United Kingdom is the biggest factor in the vote. Meanwhile, The FTSE 100 fell 0.07 pct or 4.02 points to 6,108 by 1040 GMT.