The UK gilts traded modestly firmer Tuesday as investors remained cautious ahead of the 10-year auction. We continue to foresee that the 10-year gilt yields will increase towards 1.50 percent multi-day and then 1.60 percent.
The yield on the benchmark 10-year gilts, which moves inversely to its price, fell 1-1/2 basis points to 1.39 percent, the super-long 30-year bond yield dipped 1 basis point to 2.01 percent and the yield on short-term 2-year slid 1 basis point to 0.09 percent by 09:40 GMT.
Crude oil prices declined as investors chased in profit after a long rally. The International benchmark Brent futures fell 0.46 percent to $54.66 and West Texas Intermediate (WTI) dipped 1.06 percent to $51.24 by 09:00 GMT.
The rise to 55.2 on the UK services sector PMI, from 54.5 in October, is exactly as we expected, but far exceeds the market consensus prediction of a fall to 54.0, and is indicative of a faster rate of activity expansion last month.
Moreover, the UK’s November construction PMI hardens to 52.8, hitting highest since March this year, from 52.6 in October, but as it contrasts with the market consensus expectation of a dip to 52.2, should, in theory, be interpreted as slightly GBP-positive. It still remains below its long range average of 54.2, though, but the latest 3 months trend is on an improving path.
Meanwhile, the FTSE 100 traded flat at 6,743 by 09:40 GMT. While at 09:00 GMT, the FxWirePro's Hourly GBP Strength Index remained highly bullish for second straight day at +106.10 (higher than +75 represents purely bullish trend).
