U.K Gilts firm on weak risk sentiments

The British 10-year bonds modestly gained on Friday as investors pour into safe-haven assets amid deepening economic growth fears after reading wave of disappointing economic data this week and declining crude oil prices due to profit taking. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved lower 0.82 pct to 1.579 pct and the yield on the 2-year bonds dipped 0.78 pct to 0.507 pct by 1015 GMT.

Yesterday, United Kingdom March retail sales figure tumbled 1.3 m/m pct, against market expectation of 0.1 pct m/m fall, from down 0.4 pct m/m in February. On annually basis, it rose 2.7 pct, lower than the consensus of 4.4 pct, as compared to prior 3.8 pct. After wave of disappointing economic data like weak Industrial Production and high unemployment rate, this may increase worries that development in the U.K economy is easing off ahead of a referendum on membership of the European Union planned for June.

Crude oil prices also lost ground Friday as traders took profit following the weekly surge after Crude oil prices jumped to 5-month high as Energy Information Administration's (EIA) showed that crude stock rose lower than the market expectation last week. The International benchmark Brent futures fell 0.20 pct to $44.44 and West Texas Intermediate (WTI) tumbled 0.05 pct to $43.16 by 1015 GMT.

The United Kingdom Gilts have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of England's target. Moreover, Market speculation that Petroleum Exporting Countries (OPEC) and Russia will meet in Moscow next month to again strike a deal on oil output freeze, boosted crude oil investors confidence. But, Russian Energy Minister Alexander Novak denied about any such meeting happening in Russia in May. On Sunday, the negotiations between Petroleum Exporting Countries (OPEC) and Russia failed to reach an agreement in the Doha round of talks to strike a deal on oil output freeze.

The investors will now focus on the Q1 Gross Domestic Product (GDP) on Wednesday (0830 GMT), which is expected to decline to 0.4 pct q/q, from 0.6 pct in the previous quarter.

We foresee that the BOE will also be wary of increasing interest rates until after a June referendum on Britain’s membership of the European Union, one of several uncertainties they say are weighing on the prospects for the global economy.

Meanwhile, The FTSE 100 fell 0.87 pct or 55.44 points to 6,326 by 1015 GMT.