U.K Gilts yield plunge on soft wages and jobs data

The British 10-year bond yield plunged on Wednesday after reading softer-than-expected wages and jobs data. Also, weak oil prices drove investors towards the safe assets. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved down 2.06 pct to 1.476 pct and the yield on the 2-year bonds fell 3.77 pct to 0.459 pct by 0945 GMT.

The United Kingdom’s average weekly earnings rose 1.8 pct, against market expectation of 2.3 pct, from prior up 2.1 pct. Similarly, weekly earnings ex-bonus rose 2.2 pct, from previous 2.2 pct. Moreover, March jobless claims change increases 6.7k (consensus was for a fall of 11k), from down 9.3k in February and claimant count stood unchanged at 2.1 pct. February employment change rose tad 20k, against market expectation of 60k, as compared to previous 116k. In addition, February unemployment rate remained steady at 5.1 pct from previous month, as expected.

The United Kingdom Gilts 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, Kuwaiti oil and gas labourers finished a 3-day strike that had briefly cut the OPEC crude output to half, which drag oil prices down. On Sunday, the negotiations between Petroleum Exporting Countries (OPEC) and Russia failed to reach an agreement in the Doha round of talks to strike a deal on oil output freeze. The International benchmark for crude oil prices, Brent futures fell 1.89 pct to $43.24, while West Texas Intermediate crude oil dipped 2.39 pct to $40.10 by 0945 GMT.

The investors will now focus on the retail sales data (0830 GMT) and the ECB governing council meeting on Thursday (1145 GMT), which is expected to culminate in the decision to leave policy unchanged.

We foresee that the BOE will also be wary of increasing interest rates until after a June referendum on Britain’s membership of the European Union, one of several uncertainties they say are weighing on the prospects for the global economy.

Meanwhile, The FTSE 100 fell 0.51 pct or 32.35 points to 6,373 by 0945 GMT.