UK gilts suffer despite disappointment in November retail sales; eyes on BoE’s policy decision

The United Kingdom’s gilts suffered during European trading hours Thursday even as investors faced disappointment in the country’s retail sales for the month of November, released today, while still eyeing the Bank of England’s (BoE) monetary policy meeting, scheduled to be held today by 12:00GMT for further direction in the debt market.

The yield on the benchmark 10-year gilts, jumped 3 basis points to 0.806 percent, the 30-year yield also surged nearly 3 basis points to 1.304 percent and the yield on the short-term 2-year gained 1-1/2 basis points to 0.544 percent by 11:00GMT.

At face value, November’s further drop in retail sales volumes is pretty concerning. But the picture is clouded by the late timing of Black Friday this year, which probably means November’s figures look worse than they really are and that sales could bounce back in December, Capital Economics reported.

November’s 0.6 percent m/m fall in retail sales volumes was weaker than expected (consensus +0.3 percent m/m, CE -1.0 percent m/m) and indicates that consumer spending growth could slow in Q4 from Q3’s 0.4 percent q/q, the report added.

However, Black Friday wasn’t until November 29 this year, almost a week later than usual, meaning that it fell outside of the ONS November survey period and will be captured in December’s release instead. This should mean that sales in November would be much weaker than normal, but that sales in December would be strong, Capital Economics further noted in the report.

Meanwhile, the FTSE 100 remained nearly flat at 7,537.35 by 11:10GMT.