UK gilts jump after October retail sales disappoint market expectations

The United Kingdom’s gilts jumped during European trading hours Thursday after the country’s retail sales for the month of October disappointed market expectations ahead of a silent end to the trading week tomorrow.

The yield on the benchmark 10-year gilts, slumped 2 basis points to 0.740 percent, the 30-year yield slipped nearly 1-1/2 basis points to 1.260 percent and the yield on the short-term 2-year also traded 1-1/2 1 basis points down at 0.543 percent by 11:15GMT.

October’s consumer price inflation figures were in line with the Bank of England’s expectations so they are unlikely to move the dial on the outlook for interest rates. The drop in CPI inflation from 1.7 percent in September to 1.5 percent in October was a touch weaker than the consensus forecast of 1.6 percent, although in line with our expectation and the Bank of England’s forecast, leaving inflation at its lowest level in almost three years, Capital Economics reported.

The producer price figures showed that input price inflation fell from -3.0 percent to -5.1 percent, its lowest rate since April 2016, while output price inflation nudged down from 1.2 percent to 0.8 percent which should feed into the core rate of inflation in time, the report added.

"Overall, the figures do little to change our view that inflation will spend more time below 2 percent than above it in 2020 and that if Brexit is delayed further, interest rates will be cut, in May 2020," Capital Economics further commented in the report.

Meanwhile, the FTSE 100 slipped -0.64 percent to trade at 7,319.25 by 11:20GMT.