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UK gilts nose-dive ahead of February manufacturing production, 10-year auction

The UK gilts nose-dived during European session Tuesday as investors wait to watch the country’s manufacturing production for the month of February, scheduled to be released on April 11 by 08:30GMT. Further, the long-term 10-year auction, due on the same day will add further direction to the debt market.

The yield on the benchmark 10-year gilts, rose 1-1/2 basis points to 1.42 percent, the super-long 30-year bond yields jumped nearly 2-1/2 basis points to 1.80 percent and the yield on the short-term 2-year traded nearly 2 basis points higher at 0.89 percent by 09:15GMT.

The overnight release of the latest BRC Retail Sales Monitor suggested that the 'Beast form the East' did not scare UK shoppers away. The value of retail sales increased by 2.3 percent y/y in March, up from 1.6 percent y/y pace in February and the highest rate in six months, while on the like-for-like basis sales increased by also firm 1.4 percent y/y.

Easter helped to maintain activity on the High Street, with consumers raising their spending on food ahead of the holidays by 5.3 percent 3m/y, which was the steepest increase since 2009. However, less-essential non-food spending extended the downward trend and declined by 1.0 percent 3m/y.

With several factors distorting the true picture, the strength of consumer spending growth in Q1 is not entirely clear, but with inflation on a downward trajectory now and wage growth showing some signs of recovery, the outlook is looking slightly more positive.

Meanwhile, the FTSE 100 rose 0.40 percent to trade at 7,223.25 by 09:20 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bullish at 83.40 (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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