UK gilts trade narrowly mixed despite upbeat December construction PMI

The UK gilts traded narrowly mixed Wednesday despite upbeat December construction PMI, which accounts for around 5.9 percent of the country’s gross domestic product (GDP).

The yield on the benchmark 10-year gilts, which moves inversely to its price, fell 1/2 basis point to 1.32 percent, the super-long 40-year bond yield climbed 1/2 basis point to 1.80 percent and the yield on short-term 2-year bounced 1-1/2 basis points to 0.14 percent by 10:50 GMT.

Activity in Britain's construction sector expanded at the fastest rate in nine months in December, boosted by more house building, but sterling's weakness drove the biggest rise in costs in over five years, an industry survey showed on Wednesday, Reuters reported.

The Markit/CIPS purchasing managers' index (PMI) rose to 54.2 in December, its strongest since March and well ahead of expectations in a Reuters poll for it to hold steady at November's reading of 52.8.

Moreover, 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.

Meanwhile, the FTSE 100 traded 0.07 percent lower at 7,173.5 by 10:50 GMT. While at 10:00 GMT, the FxWirePro's Hourly GBP Strength Index stood neutral at +35.67 (higher than +75 represents purely a bullish trend).