UK gilts flat after May employment report shows mixed signals; June CPI seen rising to 2.6 pct y/y

The United Kingdom’s gilts remained tad higher during European session Tuesday after the country’s employment report for the month of May showed mixed results. Investors will now turn their focus on the consumer price inflation data for the month of June, scheduled to be released on July 18 by 08:30GMT for further direction in the debt market.

Consumer prices are expected to rise to 2.6 percent y/y, from 2.4 percent y/y in April, while on a m/m basis, it is seen dipping to 0.2 percent, from prior 0.4 percent.

The yield on the benchmark 10-year gilts, slipped nearly 1 basis point to 1.27 percent, the super-long 30-year bond yields remained tad lower at 1.73 percent and the yield on the short-term 2-year too traded 1/2 basis point lower at 0.72 percent by 09:45GMT.

The country’s employment figures touched a record high in May, following a stronger-than-expected job creation. According to data released by the Office for National Statistics on Tuesday, the number of employed rose by 137k, pushing the employment rate to 75.7 percent, highest since 1971, when the series began. Unemployment remained unchanged, holding at a 43-year low of 4.2 percent.

Money markets are pricing in an about 80 percent chance of an interest-rate hike in August, a move also expected by more than 70 percent of economists in the latest Bloomberg survey.

Meanwhile, the FTSE 100 traded 0.09 percent lower at 7,593.50 by 10:05GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -54.73 (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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