UK gilts gain as mortgage approvals decline unexpectedly in November

The UK gilts gained Wednesday after recent data showed that the country’s mortgage approvals fell for the first time since September, defying expectations for a further rise.

The yield on the benchmark 10-year gilts, which moves inversely to its price, fell nearly 3 basis points to 1.31 percent, the super-long 30-year bond yield dipped 2-1/2 basis points to 1.94 percent and the yield on short-term 2-year slid 1 basis point to 0.07 percent by 10:00 GMT.

The British Bankers Association in its report mentioned that the UK’s new mortgage loans for November slipped to 40.7k from previous up 40.8k, undershooting expectations for a rise. These data will be followed by a complete BoE report later.

According to the latest Citi/YouGov survey, UK’s inflation expectations for the short term are broadly steady at 2.4 percent whilst expectations for the longer term have risen to 3.0 percent up from 2.8 percent in November.

Last week, the Federal Reserve Chair Janet Yellen commented that the United States is now seeing its strongest labour market in nearly a decade as job creation has continued at a relatively steady pace. Also added that she has seen signs of wage growth improving and that weekly earnings for younger workers are making strong gains.

The Federal Open Market Committee increased the fed funds rate to a 0.50-0.75 percent range on December 14, as widely expected. The statement noted that information received since the November meeting indicates that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year.

Also, the new projections showed that the central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.

Meanwhile, the FTSE 100 traded 0.34 percent higher at 7,091.71 by 10:00 GMT. While at 10:00 GMT, the FxWirePro's Hourly GBP Strength Index remained highly bearish at -102.02 (lower than -75 represents purely a bearish trend).