UK gilts slump on upbeat December manufacturing PMI, construction PMI in focus

The UK gilts slumped Tuesday as recent data showed that the country’s manufacturing PMI rose to highest since June 2014 in December.

The yield on the benchmark 10-year gilts, which moves inversely to its price, rose 7 basis points to 1.31 percent, the super-long 30-year bond yield also climbed 8 basis points to 1.94 percent and the yield on short-term 2-year bounced 5 basis points to 0.13 percent by 09:30 GMT.

The UK manufacturing PMI for December jumped to 56.1 from 53.6 (upwardly-revised from 53.4), which comes higher than the market expectations of 53.3. This is actually the best reading since June 2014, and will confound expectations for a Brexit-related slowdown in the economy.

According to the latest Citi/YouGov survey, UK’s inflation expectations for the short term are 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.

Lastly, investors will remain keen to focus on the upcoming economic data, highlighted by construction PMI and service PMI.

Meanwhile, the FTSE 100 traded 0.46 percent higher at 7,175 by 09:30 GMT. While at 09:00 GMT, the FxWirePro's Hourly GBP Strength Index stood neutral at -68.97 (lower than -75 represents purely a bearish trend).