UK gilts suffer ahead of BoE Governor Carney’s speech, January employment report

The UK gilts suffered during European session Monday as investors wait to watch Bank of England (BoE) Governor Mark Carney’s speech, scheduled to be held later today and the country’s employment report for the month of January, due on February 21 by 09:30GMT.

The yield on the benchmark 10-year gilts, jumped 2 basis points to 1.60 percent, the super-long 30-year bond yields rose nearly 1-1/2 basis points to 1.98 percent while the yield on the short-term 2-year traded 2 basis points higher at 0.67 percent by 11:05GMT.

In terms of the UK dataflow, Wednesday’s labor market report will be the main event. The data so far point to a rise in employment of around 165k in the three months to December, which should ensure the unemployment rate remains unchanged at 4.3 percent. The Bank of England has highlighted survey evidence that suggests the increasingly tight labor market is prompting a resurgence of inflationary wage pressures.

Bank Governor Mark Carney and his senior colleagues will give insight into the more hawkish stance revealed in last week’s Inflation Report when they testify in front of the House of Commons’ Treasury Select Committee on Wednesday afternoon. However, the official data for December are likely to confirm that the squeeze on real earnings persisted at the end of 2017, with average earnings rising 2.5 percent 3m/y still 0.5ppt below the annual rate of CPI.

Public sector borrowing figures will also be released the same day. With January traditionally the biggest month for personal tax receipts, a surplus in the region of GBP10 billion (compared to GBP13.2 billion a year earlier) would not be surprising. Thursday will see the second estimate of Q4 GDP and there is little reason to expect a revision from the overall initial estimates of 0.5 percent q/q and 1.5 percent y/y.

The CBI Distributive Trades survey, also out on Thursday, will provide initial clues on whether January’s slower pace of retail spending growth, confirmed on Friday, continued into February. The CBI’s corresponding Industrial Trends Survey, out tomorrow, will provide insights into the momentum of the manufacturing sector in February.

Meanwhile, the FTSE 100 traded 0.19 percent lower at 7,280.50 by 11:05 GMT, while at 11:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 66.22 (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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