UK gilts rebound after investors shrug-off modest upswing in February construction PMI

The UK gilts rebounded Thursday after investors largely shrugged off higher-than-expected construction Purchasing Managers’ Index (PMI) for the month of February. Also, investors will be eyeing the release of services PMI, scheduled for March 3.

The yield on the benchmark 10-year gilts, which moves inversely to its price, plunged nearly 3 basis points to 1.16 percent, the super-long 30-year bond yields also fell nearly 2 basis points to 1.75 percent and the yield on the short-term 2-year traded lower by 1 basis point at 0.10 percent by 09:40 GMT.

The Markit/CIPS UK construction purchasing managers’ index rose to 52.5 from 52.2 in January, above the 50 mark that separates contraction from expansion for the sixth consecutive month. Economists had been expecting the reading to remain unchanged at 52.5.

However, the rate of output growth was still weaker than its post-referendum peak of 54.2 in December 2016 and subdued compared to the trends over the past three-and-a-half years.

The UK gilts have been closely following developments in oil markets because of their impact on inflation expectations. The International benchmark Brent futures moved lower 0.64 percent to USD56.00 and West Texas Intermediate (WTI) fell 0.84 percent to USD53.42 by 09:50 GMT.

Meanwhile, the FTSE 100 fell 0.05 percent to 7,379.05 by 09:50 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -40.32 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex