UK gilts slump as unemployment slides to lowest since 2005

The UK gilts slumped Wednesday after recent data showed that the unemployment rate fell to the lowest since 2005 in September.

Also, rising probability of a December rate hike by the Federal Reserve drove out investors from safe-haven buying.

The yield on the benchmark 10-year gilts, which moves inversely to its price, rose 4-1/2 basis points to 1.425 percent, the super-long 30-year bond yield jumped 4 basis points to 2.055 percent and the yield on short-term 2-year climbed 2 basis points to 0.224 percent by 10:30 GMT.

The UK’s unemployment rate fell to 4.8 percent in September, from previous 4.9 percent. On the other hand, the claimant count jumped by a seasonally adjusted 9,800 in October, expectation was for an increase of 2,000 people, and following an increase of 5,600 in September.

Moreover, the British gilts have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield bounced to 2.26 percent for the first time in 2016.

Also, a heavy sell-off in government bonds was supported by rising expectations that the U.S. President-elect Donald Trump's policies, such as fiscal expansion and protectionism on international trade, could support growth and inflation.

Last week, the United States Republican candidate Donald Trump pinned his victory against Democrat opponent Hillary Clinton in the 2016 presidential election. Investors again revised the outlook for US interest rates after Donald Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 94 percent.

Meanwhile, the FTSE 100 traded 0.16 percent lower at 6,782 by 10:30 GMT. While at 09:00 GMT, the FxWirePro's Hourly GBP Strength Index stood neutral at 22.23 (higher than +75 represents purely bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex