UK gilts suffer despite lower-than-expected February construction PMI; BoE Gov Carney’s speech eyed

The United Kingdom’s gilts suffered during Monday’s afternoon session, even as the country’s construction PMI for the month of February came in lower than market expectations and investors will now keep a close eye on the Bank of England (BoE) Governor Mark Carney’s speech, scheduled to be held on March 5 by 15:35GMT.

Also, Britain’s February services PMI and short-term 5-year gilt auction, due through this week, will add detailed direction to the debt market.

The yield on the benchmark 10-year gilts, fell 2 basis points to 1.315 percent, the super-long 30-year bond yields also slipped nearly 2 basis points to 1.819 percent and the yield on the short-term 2-year too edged 2 basis points down to 0.818 percent by 10:30GMT.

At 49.5 in February, down from 50.6 in January, the headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index registered below the 50.0 no-change threshold for the first time since the snow disruptions seen in March 2018. Aside from this brief weather-related decline in output, the latest reading was the lowest since September 2017.

The index measuring business expectations for the year ahead remained inside positive territory, but the degree of confidence eased to a four-month low and was well below the long-run survey average. Construction firms noted that delays to client decision-making had slowed progress of new project starts, which could create gaps in their future workloads.

"On the upside, input price inflation was not as strong compared to the last couple of years and employment creation was modestly maintained in spite of some companies placing a freeze on any new hires. In short, the foundations of the construction sector are crumbling under the weight of Brexit and businesses are switching to survival mode until the way forward is cleared," said Tim Moore, Economics Associate Director at IHS Markit.

Meanwhile, the FTSE 100 remained 0.40 percent higher at 7,136.00 by 10:35GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 81.06 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex