UK gilts jump after June CPI disappoints; investors eye BoE Governor Carney’s speech, 5-year auction

The UK gilts jumped Tuesday after markets were disappointed by the weaker-than-expected reading of the country’s consumer price inflation for the month of May, released today. However, the Bank of England (BoE) Governor Mark Carney’s speech, due later today will provide detailed direction to the debt market.

The yield on the benchmark 10-year gilts, plunged 3-1/2 basis points to 1.24 percent, the super-long 30-year bond yields slumped nearly 4 basis points to 1.86 percent and the yield on the short-term 2-year traded nearly 3 basis points lower at 0.27 percent by 08:40 GMT.

Britain’s annual inflation rate fell back sharply from a four-year high last month, defying expectations that it would remain steady. The Office for National Statistics said consumer prices rose 2.6 percent in June compared to the same month last year, and down from 2.9 percent in the previous month.

Core inflation, which strips out volatile elements such as food and energy, also slipped back from 2.6 percent to 2.4 percent. Softer inflation will help ease the pressure on UK consumers. The accelerating pace of inflation has had the worker suffering their worst in terms of real wage growth in over 2 years.

Lastly, the country’s 5-year auction and retail sales for the month of June, scheduled for release on July 19 and 20 respectively will guide financial markets deeply.

Meanwhile, the FTSE 100 traded 0.20 percent higher at 7,418.75 by 08:50 GMT, while at 08:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 128.16 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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