UK gilts little changed after steady Q2 GDP result; Yellen’s speech eyed

The UK gilts little changed Friday after the data showed that the country’s second quarter gross domestic product (GDP) remained steady from its preliminary estimate. Also, markets are likely to maintain recent range in the lead up to Fed Chair Yellen’s Jackson Hole speech on Friday.

The yield on the benchmark 10-year gilts hovered around 0.570 percent mark, the super-long 40-year bond yield remained steady at 1.133 percent and the yield on short-long 2-year bond stood flat at 0.156 percent by 09:50 GMT.

The UK GDP growth was left unchanged at its preliminary estimate of 0.6 percent q/q. On an annual basis, it also remained flat at 2.2 percent y/y from its preliminary reading. The new information though is the expenditure-based breakdown, which shows that acceleration in private consumption, to 0.9 percent q/q, as compared to 0.7 percent in the first quarter of 2016, was the key driver behind the GDP growth pick-up from 0.4 percent in Q1.

Moreover, with a recovery in business investment (0.5 percent q/q vs -0.6 percent in Q1) provided some support. The data did not capture the effects of the 'Brexit' decision, which we think will start to show up from the third quarter figures onwards.

Lastly, investors will remain keen to focus on the next week's ECB meeting, when there is a chance of another small deposit rate cut.

Meanwhile, the FTSE 100 traded 0.04 percent higher at 6,819.30 by 09:50 GMT.