UK gilts slump after January manufacturing production cheers market investors; focus on Parliament’s vote on no-deal Brexit

The United Kingdom’s gilts slumped during Tuesday’s afternoon session, after the country’s manufacturing production for the month of January, cheered market investors, beating expectations as well as prior reading in December last month.

However, The UK Parliament’s vote on the no-deal Brexit, scheduled for later today, shall provide further direction to the debt markets. Also, the country’s super-long 30-year auction, due to be held on March 14 at 10:45GMT will guide markets further thoroughly.

The yield on the benchmark 10-year gilts, jumped nearly 5 basis points to 1.227 percent, the super-long 30-year bond yields surged nearly 3 basis points to 1.718 percent and the yield on the short-term 2-year climbed nearly 4 basis points to 0.777 percent by 10:15GMT.

According to data released by the Office for National Statistics (ONS), UK’s manufacturing output came in at 0.8 percent m/m in January versus market expectations for a flat reading and -0.7 percent in December, while total industrial output registered +0.6 percent vs hopes of a steady reading and -0.5 percent in the last reading.

Yesterday evening’s Brexit deal saw Theresa May fall well short of securing the legally-binding unilateral exit mechanism and firm end-date to the Irish backstop which she had pledged to Parliament. Indeed, she achieved no changes whatsoever to the Withdrawal Agreement.

Voting in the House of Commons will start at 7pm GMT this evening, and – with MPs to be given the chance to consider all amendments tabled by MPs (including no doubt one that would approve May’s deal subject to a second referendum) – could well drag on well into the evening.

While the Brexit votes will get most attention, this morning will also bring the most notable new UK data of the week with the ONS set to release its latest short-term output indicators, including the monthly GDP figures for January. UK economic activity dropped in December by 0.4 percent m/m, which represented the joint steepest fall in the last six years, and a small recovery, of about 0.2 percent m/m, is expected for the start of the year.

Meanwhile, the FTSE 100 remained flat at 7,131.75 by 10:25GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 68.69 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex