UK gilts slump after BoE keeps interest rate unchanged; markets await Governor Carney’s speech

The UK gilts slumped Thursday after the Bank of England (BoE) kept the benchmark interest rate unchanged at the monetary policy meeting, held today. However, markets have largely shrugged off the lower-than-expected retail sales for the month of May, also released early today. Further, markets will remain keen to note the comments made by the central bank Governor Mark Carney, due on June 16 for detailed direction in the debt market.

The yield on the benchmark 10-year gilts, jumped over 5 basis points to 0.98 percent, the super-long 30-year bond yields climbed 4-1/2 basis points to 1.68 percent and the yield on the short-term 2-year traded 5-1/2 basis points higher at 0.14 percent by 11:00 GMT.

The BoE’s Monetary Policy Committee voted by five members to three to maintain the key interest rate at a record-low 0.25 percent. The unexpected shift comes against an uncertain backdrop for the U.K., with real earnings falling, consumer spending weakening and Prime Minister Theresa May unexpectedly losing her parliamentary majority after calling a snap election.

In contrast, UK’s retail sales volumes slumped by 1.2 percent m/m in May after an upwardly revised 2.5 percent rise in April. Some mechanical fall back in today’s report was to be expected, given the sizeable rise in the previous month and the weakening in other indicators of retail activity.

Meanwhile, the FTSE 100 slumped 1.21 percent or 91.90 points to 7,384.00 by 11:20 GMT, while at 11:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bearish at -82.28 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex