UK gilts trade weaker on expectations of rise in April consumer price inflation, retail sales

The UK gilts traded weaker on Monday on expectations of a rise in the country’s consumer price inflation (CPI), scheduled to be released on May 16. Also, the release of retail sales, due on May 18, will provide further direction to the debt market.

The yield on the benchmark 10-year gilts,  jumped 2 basis points to 1.11 percent, the super-long 30-year bond yields climbed nearly 2-1/2 basis points to 1.75 percent while the yield on the short-term 2-year traded 1/2 basis point higher at 0.11 percent by 10:10 GMT.

Major European equity markets were slightly firmer in early trade supported by higher oil prices amid increased expectations that OPEC and non-OPEC members will agree at the May 25th meeting to extend production cuts into 2018.

In line with market expectations, last week, the BoE voted by a majority of 7-1 to keep the Bank Rate unchanged at 0.25 percent and maintain the asset purchase programme at GBP435 billion. The BoE policy decision was accompanied by the release of the policy statement which supported the view that, on the assumption of a “smooth” transition to Brexit, monetary policy will likely tighten by a somewhat greater extent than the market is currently pricing-in. 

Meanwhile, the FTSE 100 rose 0.16 percent or 12.16 points to 7,447.55 by 10:20 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -130.78 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex