UK gilts plunge on higher-than-expected manufacturing production, improved trade balance

The UK gilts plunged Friday, following the release of higher-than-expected manufacturing and industrial production for the month of December along with an improvement in the country’s December trade balance.

The yield on the benchmark 10-year gilts, which moves inversely to its price, jumped nearly 2-1/2 basis points to 1.27 percent, the super-long 30-year bond yields also surged 2 basis points to 1.95 percent and the yield on the short-term 2-year edged higher by 1 basis point to 0.11 percent by 09:40 GMT.

UK’s manufacturing output jumped 2.1 percent m/m in December compared to a revised 1.4 percent rise seen in Nov, while total industrial output also showed a stellar performance on monthly basis, with the figures showing a 1.1 percent growth in the reported month, against +0.2 percent expected and a 2.0 percent rebound seen in November.

Further, UK’s trade deficit narrowed in the fourth quarter as exports to countries outside the European Union rose. The deficit shrank to GBP8.6 billion from October to December, a GBP5.6 billion drop from the third quarter.

Lastly, investors also wait to note the country’s January consumer price inflation (CPI) data, labor market report and January retail sales scheduled to be released on February 14, 15 and 17 respectively for further direction in the debt market.

Meanwhile, the FTSE 100 rose 0.35 percent to 7,254.50 by 10:10 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 161.18 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex