UK gilts continue to fall ahead of January employment report, Brexit Minister Davis’ speech

The UK gilts continued to decline during European session Tuesday as investors wait to watch the country’s employment report for the month of January, due on February 21 by 09:30GMT.

Also, of utmost importance is Brexit Minister David Davis’ speech, due later today, where he will supposedly set out his thoughts against the backdrop of continuing negotiations over a transition deal, where he has so far failed to address significant EU concerns on numerous issues including the Irish border, the UK’s need to accept all rules adopted by the EU during the transition period, and the UK’s intention that EU citizens arriving during the adjustment period will have fewer rights than those currently residing in the UK.

The yield on the benchmark 10-year gilts, rose 1-1/2 basis points to 1.61 percent, the super-long 30-year bond yields surged 1 basis point to 2.00 percent and the yield on the short-term 2-year traded nearly 1-1/2 basis points higher at 0.68 percent by 08:45GMT.

Moreover, the UK government’s position on its desired future trading relationship with the EU remains half-baked, with a meeting of the key Cabinet committee scheduled for Thursday to try to find a compromise among the various government ministers.

So, while Davis will today argue for continued close co-operation between the UK and the EU on regulations and standards, he’ll offer nothing new to explain quite how the UK might ensure continued "frictionless" trade while remaining outside the single market and customs union break, and nothing new to break the current deadlock in the negotiations. The UK government is currently targeting a transition deal at the European Council meeting on 22-23 March.

Failure to reach an agreement there would fail to lift the significant uncertainty that is already hampering business’ investment plans, at a time when the solid upswing in global demand should (as it currently is elsewhere in the EU) be translating to a major step-up in corporate capex. There will be more insight of how the industry is faring more generally with the release of the CBI Industrial Trends survey at 11.00.

Meanwhile, the FTSE 100 traded 0.10 percent lower at 7,239.25 by 08:50 GMT, while at 08:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -71.99 (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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