UK gilts climb despite better-than-expected August services PMI, 5-year auction in focus

The United Kingdom’s gilts climbed during European session Wednesday even as the country’s services PMI for the month of August cheered market expectations, also higher than the previous reading in July.

The yield on the benchmark 10-year gilts, fell nearly 2 basis points to 1.413 percent, the super-long 30-year bond yields slipped 1-1/2 basis points to 1.770 percent while the yield on the short-term 2-year traded nearly 2 basis points lower at 0.726 percent by 10:30GMT.

At 54.3 in August, up from 53.5 in July, the seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index reached its second-highest level since February. The headline index has posted above the 50.0 no-change mark in each month since August 2016, and the latest reading was slightly above the average seen over this period (54.0). Service providers linked higher activity to resilient business and consumer demand.

"In summary, though the sector remained in positive territory, the dark clouds of political indecision are still having an effect and preventing more business activity. Service providers are likely to continue along this vein for the rest of the year until those clouds have cleared," said Chris Williamson, Chief Business Economist at IHS Markit.

Meanwhile, the FTSE 100 slipped 0.46 percent to 7,423.25 by 10:35GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -153.627 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex