UK gilts climb despite better-than-expected December manufacturing PMI; construction PMI in focus

The UK gilts climbed during Wednesday’s afternoon session after the country’s manufacturing PMI for the month of December, released today, beat market expectations, also higher than the previous reading in November. Investors will now remain focused on Britain’s construction PMI for the similar period, due on January 3 for further direction in the debt market.

The yield on the benchmark 10-year gilts, plunged 6-1/2 basis points to 1.205 percent, the super-long 30-year bond yields plunged nearly 4 basis points to 1.779 percent and the yield on the short-term 2-year traded 5 basis points lower at 0.700 percent by 09:50GMT.

The end of 2018 saw a further modest improvement in business conditions in the UK manufacturing sector. At 54.2 in December, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to a six-month high, up from 53.6 in November.

The rise in the PMI level during December was mainly driven by stronger inflows of new business and a solid increase in stocks of purchases. Movements in both mainly reflected Brexit preparations by manufacturers and their clients. Output also increased, but at a slower pace than during November.

Meanwhile, the FTSE 100 traded 1.20 percent lower at 6,646.89 by 09:55GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 52.69 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex