UK gilts showcase uncertain behaviour ahead of BoE Governor Carney’s speech, 30-year auction

The UK gilts behaved heterogeneously on Monday as investors wait to observe the Bank of England (BoE) Governor Mark Carney’s speech, scheduled to be held on June 20. Also, the country’s 30-year auction, due on June 22, will provide detailed direction to the debt market.

The yield on the benchmark 10-year gilts, rose nearly 1 basis point to 1.02 percent, the super-long 30-year bond yields slumped nearly 1-1/2 basis points to 1.70 percent and the yield on the short-term 2-year traded 1-1/2 basis points higher at 0.17 percent by 09:20 GMT.

In line with market expectations, Emmanuel Macron's La République En Marche party and its ally centrist party MoDem won the French legislative elections securing 360 seats in the 577-seat National Assembly. Markets showed little reaction as the prospect of Emmanuel Macron’s party winning a commanding majority was already priced in. With the French elections out of the way, focus shifts to Brexit negotiations that are scheduled to start today.

The BoE surprised markets with two members joining MPC Kristin Forbes, the most hawkish member so far, and voting all three in favour of a 25 basis points rate hike at this week’s monetary policy meeting. Reacting to the MPC minutes, GBP gained some ground and UK Gilts came under pressure.

Meanwhile, the FTSE 100 rose 0.70 percent or 49.96 points to 7,513.75 by 09:30 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 139.30 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex