UK gilts mixed after EU extends Brexit deadline until Jan 31; October manufacturing PMI eyed

The United Kingdom’s gilts remained narrowly mixed during European trading hours Monday after the European Union extended the Brexit deadline until January 31, 2020, with possibilities of an earlier exit if the UK Parliament succeeds in passing a withdrawal deal.

The yield on the benchmark 10-year gilts, hovered around 0.677 percent, the 30-year yield remained flat at 1.168 percent and the yield on the short-term 2-year traded tad lower at 0.510 percent by 12:00GMT.

The EU reportedly agrees to a three month extension to the Brexit deadline to January 31, with the option of an earlier departure if the Withdrawal Agreement is ratified, Lloyds Bank reported.

However, there remains a possibility for the UK to leave on December 1, 2019 or January 1, 2020 if the Withdrawal treaty had been ratified. The draft proposal also ‘firmly’ ruled out the reopening of Johnson’s Brexit deal and underscored the UK’s obligation to nominate a member to serve in the new European Commission from November 1 until its official departure, Daiwa Capital Markets reported.

Aside from the politics, the data calendar will be dominated by October sentiment surveys, with perhaps most notable the manufacturing PMIs due on Friday. Despite a modest pickup in September, the headline index remained below the key-50 mark for the fifth consecutive month, the report added.

And while a no-deal Brexit at the end of the month was eventually effectively taken off the table, persistent political uncertainty will have continued to hamper conditions in the sector, with the headline index likely to have remained firmly in contractionary territory at the start of Q4, Daiwa further noted in the report.

Meanwhile, the FTSE 100 remained flat at 7,317.41 by 12:15GMT.