UK gilts jump as manufacturing production disappoints; investors eye BoE Governor Carney’s speech

The UK gilts jumped Friday after the country’s manufacturing production for the May disappointed. Also, the Bank of England Governor Mark Carney’s speech, due later today will provide further direction to the debt market.

The yield on the benchmark 10-year gilts, fell 1 basis point to 1.31 percent, the super-long 30-year bond yields also slipped 1 basis point to 1.93 percent and the yield on the short-term 2-year traded 2 basis points lower at 0.34 percent by 10:20 GMT.

Industrial production fell by 0.1 percent m/m in May, sharply undershooting expectations of +0.4 percent. While non-manufacturing sectors were forecast to have a strongly negative effect on overall production, this was expected to be more than offset by a pick-up in manufacturing output. In the event, this failed to materialise, with manufacturing activity posting a decline of 0.2 percent m/m, again strongly disappointing expectations.

Still, with the retrenchment this month being narrowly based – with only 4 out of 13 manufacturing sub-sectors posting declines – this suggests that some sectors are faring better than the headlines suggest. Nevertheless, given the overall decline in manufacturing output in May alongside the drop in utilities output, which was expected given the warmer seasonal weather in May, the annual rate of growth in industrial output remained in negative territory.

Meanwhile, the FTSE 100 traded 0.12 percent higher at 7,344.25 by 10:30 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -142.44 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex