UK gilts suffer despite lower-than-expected December construction PMI; services PMI in focus

The UK gilts suffered during Thursday’s afternoon session even as the country’s construction PMI for the month of December, released today, missed market expectations, also lower than the previous reading in November. Investors will now remain focused on Britain’s services PMI for the similar period, due on January 4 for further direction in the debt market.

The yield on the benchmark 10-year gilts, jumped nearly 2 basis points to 1.229 percent, the super-long 30-year bond yields rose 1 basis point to 1.788 percent and the yield on the short-term 2-year traded nearly 2-1/2 basis points higher at 0.740 percent by 11:10GMT.

At 52.8 in December, down from 53.4 in November, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted above the crucial 50.0 no-change value for the ninth consecutive month. However, the latest reading signalled only a modest rate of expansion that was the slowest seen since September.

A solid rise in employment numbers was recorded across the construction sector in December. However, the rate of job creation eased from November's near three-year peak. Some firms noted that efforts to reduce costs had led to the non-replacement of voluntary leavers at the end of the year. Sub-contractor usage meanwhile picked up, with the rate of expansion the strongest since December 2015.

Meanwhile, the FTSE 100 traded 0.47 percent lower at 6,705.75 by 11:15GMT.