UK gilts fall ahead of November manufacturing, services PMI

The United Kingdom’s gilts fell during European trading hours Monday as investors remained side-lined amid a muted trading session that witnessed data of little economic significance.

However, attention might turn towards the country’s manufacturing and services PMIs for the month of November, both scheduled to be released by end of this trading week for further direction into the debt market.

The yield on the benchmark 10-year gilts, rose 1-1/2 basis points to 0.746 percent, the 30-year yield slipped jumped 2 basis points to 1.281 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.566 percent by 10:30GMT.

Politics will continue to dominate the news flow in the run up to next month’s general election, with the major parties due to publish their election manifestos while the first televised leaders’ debate between Boris Johnson and Labour’s Jeremy Corbyn due tomorrow evening. The past week’s polling data, however, suggest an increasingly likelihood of a Conservative majority, with the probability of such an outcome now probably above 60 percent.   

Turning to the economic data, there are a couple of November sentiment surveys of note kicking off tomorrow with the CBI’s industrial trends survey. This is expected to show that manufacturing orders remained considerably weaker than a year earlier, as political and economic uncertainty continue to weigh on conditions in the sector, the report added.

But arguably more attention will be on the first ever release of UK flash PMIs on Friday, which will offer insight into economic activity in the manufacturing and services sectors in November. While the headline manufacturing PMI is likely to stay firmly in contractionary territory, it remains to be seen whether the services PMI was any stronger than the 50-level in October, that indicated stagnation at the start of Q4.

Lastly, Thursday will bring the latest public sector finance figures, which are expected to show that net borrowing in October was higher than a year earlier. The fiscal policy pledges of the various political parties, however, suggest that the underlying state of the public finances is highly likely to deteriorate over the coming year, Daiwa further noted in the report.

Meanwhile, the FTSE 100 remained flat at 7,308.80 by 10:35GMT.