UK gilts sag as labor market remains resilient, December retail sales in focus

The UK gilts sunk Wednesday as the country’s labor market remained resilient with the economy losing fewer jobs than expected and wage growth picked up toward the end of 2016. Also, investors are looking forward to the release of retail sales data on Friday for further direction in the debt market.

The yield on the benchmark 10-year gilts, which moves inversely to its price, rose 1 basis point to 1.32 percent, the super-long 30-year bond yields also moved higher by over 1 basis point to 1.98 percent while the yield on short-term 2-year crawled 1 basis point to 0.19 percent by 10:05 GMT.

The number of people in work fell by 9,000 to 31.8 million in the three months through November, whereas economists had predicted a 35,000 decline. The jobless rate stayed at 4.8 percent, the lowest since 2005, and wage growth reached the highest rate since 2015. Unemployment fell by 52,000 to 1.6 million over the period, as the drop in the number of people in work more than offset those leaving the workforce.

Moreover, the country’s consumer price inflation (CPI) for December beat market expectations, rising 1.6 percent, from 1.2 percent in November. Also, core inflation, excluding volatile goods like oil and food, rose 1.7 percent in the month, up from 1.4 percent at the previous reading, and again ahead of expectations.

Lastly, according to the latest Citi/YouGov survey, UK’s inflation expectations for the short term remained broadly steady at 2.4 percent whilst expectations for the longer term have risen to 3.0 percent up from 2.8 percent in November.

Meanwhile, the FTSE 100 rose 0.01 percent to 7,221 by 10:10 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 110.78 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex