UK gilts tad lower on improved optimism over BoE rate hike as spotlight turns on Brexit headlines

The United Kingdom’s gilts remained tad lower during Wednesday’s afternoon session, as investors have turned their bet towards higher chances of a rate hike by the Bank of England (BoE) after Prime Minister Theresa May, in her overnight speech, left the door open for a second Brexit referendum, thus leading to a rise in pound as well.

The yield on the benchmark 10-year gilts, rose 1-1/2 basis points to 1.224 percent, the super-long 30-year bond yields remained tad higher at 1.752 percent and the yield on the short-term 2-year jumped nearly 2 basis points higher at 0.804 percent by 10:00GMT.

After Theresa May yesterday cleared the way to an extension of the Article 50 deadline, offering another parliamentary meaningful vote on her (likely minimally tweaked) Brexit deal by March 12 and additional votes on ‘no deal’ and Article 50 extension if necessary on March 13 and 14, that timetable seems bound to be rubber-stamped today in the latest round of Brexit votes in the House of Commons, Daiwa Capital Markets reported.

A new proposal, to be tabled by Labour’s Yvette Cooper, will also seek to prevent May from being able to wriggle out of those commitments. Other ‘amendments’ from the Labour Party on its preferred Brexit deal, and members of the new Independent Group, LibDems and Scots and Welsh nationalists on arrangements to prepare for a second referendum, seem bound to be defeated, the report added.

Meanwhile, the FTSE 100 remained 0.79 percent lower at 7,094.86 by 10:05GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 108.30 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex