UK gilts gain on growing consensus for easing among BoE MPC members

The UK gilts gained on Tuesday as investors as investors poured into safe-haven assets after Bank of England MPC member Martin Weale signalled that he is in favour of providing fresh stimulus for the economy in August monetary policy meeting.

The yield on the benchmark 10-year gilts fell 2-1/2 basis points to 0.786 percent, the yield on super-long 30-year bond dipped nearly 2 basis points to 1.673 percent and the yield on short-term 2-year bonds slid 1-1/2 basis points to 0.128 percent by 10:20 GMT.

The Bank of England’s Weale said that policy action in August unlikely to boost the economy before next year and monetary policy would not boost economy straight away so any action would not save the UK from recession if growth is beginning to shrink.

He further added that weaker PMI detail will be very material for next week's rate decision as it was a lot worse than expected.

Martin Weale has indicated that he has changed his mind and now favors an immediate stimulus for the economy after reading weak PMI numbers, FT reports, citing an interview.

The Markit PMI survey showed that the economy was shrinking at the fastest rate since 2009. The preliminary UK July manufacturing PMI tumbled to 49.1, against market consensus of 50.0, as compared to 52.1 in June. Similarly, the service PMI reading also dipped to 47.4, against market expectations of 49.2, from 52.3 in June.

Looking ahead, the UK’s national statistical institute is scheduled to release preliminary gross domestic product for the second quarter on Wednesday at 08:30 GMT. The GDP reading is expected to increase 0.5 percent q/q, from previous 0.4 percent q/q. Similarly, it is anticipated to bounce 2.1 percent y/y, as compared to prior 2 percent y/y.

In addition, on the back of Brexit, the International monetary fund (IMF) trimmed British GDP growth for 2016 by one percentage point to 1.2 percent, as compared to April forecast of 2.2 percent expansion.

Meanwhile, the FTSE 100 trading up 0.28 percent at 6,729 by 10:20 GMT.