UK gilts flat in muted trading; investors eye European Council’s meeting over Brexit negotiations

The UK gilts traded flat Friday as investors refrained from any major trading activity amid a muted session that witnessed data of least economic significance. Investors are now eyeing the European Council’s meeting with the EU27 leaders over the progress made in Brexit negotiations.

Further, Bank of England (BoE) member Haldane is also scheduled to speak today at 13:30GMT for any further direction in the debt market.

The yield on the benchmark 10-year gilts, hovered around 1.16 percent, the super-long 30-year bond yields remained flat at 1.73 percent and the yield on the short-term 2-year steadied around 0.45 percent by 10:00GMT.

With no major UK economic data to distract today, attention will be on the European Council meeting where EU27 leaders will discuss the progress made in the Brexit negotiations. But it’s clear that from the very positive mood music yesterday evening that the EU27 are determined to be supportive of Theresa May, and so today’s announcements might be considered a formality. Certainly, on the basis of the deal struck a week ago, they will conclude that sufficient progress has been achieved to proceed to the second phase of the negotiations, which will first focus on agreeing to the terms of the envisaged transition period.

The EU has already set out what it is prepared to offer, which is essentially continued EU membership for the UK with all the rights and obligations that entails (i.e. continued Single Market and Customs Union membership, continued ECJ jurisdiction and continued free movement and full compliance with EU trade policy, meaning that the UK will not be able to sign trade deals with other countries during that period), but with no voting rights in the European Council or any British MEPs.

However, only once a transition is agreed will thoughts turn to the future trading arrangements. And with the UK government yet to spell out the details of the future relationship it would like to build, negotiations will not begin in earnest until after the end-March European Council, and then only if the UK Government has articulated what sort of future trade deal it is seeking.

Meanwhile, the FTSE 100 traded 0.04 percent lower at 7,445.50 by 10:05 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -9.44 (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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