UK gilts jump on safe-haven demand, rising political instability

The UK gilts rallied Thursday as investors poured into safe-haven instruments ahead of the Brexit negotiations in Brussels with an unstable political situation.

The yield on the benchmark 10-year gilts, slumped 3 basis points to 1.00 percent, the super-long 30-year bond yields plunged nearly 3-1/2 basis points to 1.65 percent and the yield on the short-term 2-year traded flat at 0.21 percent by 10:10 GMT.

The two-day EU Leaders’ Summit kicks off today, which will be attended by PM May. The tone of the meeting will be closely watched, with Brexit negotiations having formally begun this week. The main agenda, however, is security and defence, and migration. It will also be the first meeting for French President Macron.

Bank of England officials have continued to instil volatility in the markets. After Governor Carney dampened expectations of a near-term rate rise, Chief Economist Haldane – who, like Carney, voted for no rate change last week – revealed that he favours withdrawing some stimulus later this year, provided the data are still on track. He noted, though, that the Bank’s economic forecasts are based on an assumption of a “smooth and orderly” Brexit. Fellow MPC member Forbes will speak this evening, which may elicit some market reaction, but her views are known (she voted for a hike last week).

Meanwhile, the FTSE 100 traded 0.48 percent lower at 7,412.75 by 10:10 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bearish at -95.67 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex