UK gilts decline post steady March CPI reading; investors eye February unemployment report

The UK gilts declined Tuesday after reading a stable consumer price inflation (CPI) during the month of March. Also, investors remain keen to watch the country’s February unemployment rate data, scheduled to be released on April 12.

The yield on the benchmark 10-year gilts, which moves inversely to its price, climbed 1 basis point to 1.09 percent, the super-long 30-year bond yields jumped 2 basis points to 1.71 percent while the yield on the short-term 3-year traded 1 basis point higher at 0.23 percent by 09:10 GMT.

UK CPI inflation in March saw a pause in its recent ascent, holding at 2.3 percent y/y, in line with both our and consensus expectations. The CPI ‘core’ rate (excluding energy, food, alcohol and tobacco) pulled back to 1.8 percent y/y in March from 2.0 percent y/y in February, the dip a little larger than expected.  RPI inflation also dipped, falling from 3.2 percent y/y to 3.1 percent y/y in March, with both this and the RPI index at 269.3 a touch below expectations.

The March CPI pause largely reflects an Easter timing effect centred on airfares, one somewhat sharper than we had factored in. With Easter this year coming later than last year, seasonal increases in ticket prices are likely to be delayed until April’s data: March saw a 3.5 percent m/m fall against a 22.9 percent m/m rise last year.

Meanwhile, the FTSE 100 rose 0.61 percent or 44.56 points to 7,394 by 11:20 GMT, while at 11:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 14.06 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex