UK gilts remain highly volatile surrounding OPEC uncertainties

The UK gilts remained highly volatile on nervous trading Wednesday ahead of an OPEC meeting final decision.

The yield on the benchmark 10-year gilts, which moves inversely to its price, rose 1 basis point to 1.37 percent, the super-long 30-year bond yield fell 1-1/2 basis points to 1.99 percent and the yield on short-term 2-year bounced 1 basis point to 0.10 percent by 09:50 GMT.

We continue to foresee that the 10-year gilt yield will increase towards 1.50 percent multi-day.

The British gilts have been closely following developments in oil markets because of their impact on inflation expectations, which is below the target level of Bank of England. Crude oil prices rallied ahead of OPEC ministerial gathering in Vienna today. The International benchmark Brent futures rose 5.62 percent to $50 and West Texas Intermediate (WTI) jumped 3.80 percent to $46.95 by 09:20 GMT.

The Organization of the Petroleum Exporting Countries (OPEC) is meeting officially in Vienna later in the day to discuss a planned production cut in an effort to curb overproduction that has dogged markets and more than halved prices since 2014.

There remains disagreement among OPEC-members over which producers should cut by how much, and a plan for non-OPEC oil giant Russia to participate has so far also failed.

Moreover, UK BoE Governor Mark Carney said that the UK financial system has endured well, suppressing, rather than magnifying financial market pressure, adding that the most significant risks to UK financial stability come from overseas and singles out highly leveraged Chinese corporates.

He highlights that the smooth financing the UK's historically large current account deficit is dependent on foreign investors and points out that GBP weakness since the EU referendum is reflective of the market's expectation of a modest increase in real income and reduced open trade.

He also points out rising domestic household indebtedness for the first time since the financial market crisis, as consumers draw down savings and increase borrowing. He warns that additional risks to the Eurozone could occur as a result of 'Brexit', adding that it will take a while to clarify the UK's future relationship with the EU, while the orderliness of the adjustment will affect stability.

Meanwhile, the FTSE 100 traded 0.25 percent higher to 6,788 by 10:00 GMT. While at 10:00 GMT, the FxWirePro's Hourly GBP Strength Index stood neutral at +18.33 (higher than +75 represents purely bearish trend).