UK gilts mixed on market optimism post release of Q2 GDP data; September manufacturing PMI eyed

The United Kingdom’s gilts remained mixed during European trading hours Monday as investors turned optimistic following the release of the country’s gross domestic product (GDP) for the second quarter of this year. Market participants will now be eyeing Britain’s manufacturing PMI for the month of September, scheduled to be released on October 1 by 08:30GMT for further direction in the debt market.

The yield on the benchmark 10-year gilts, traded tad higher at 0.503 percent, the 30-year yield jumped 2-1/2 basis points to 0.993 percent while the yield on the short-term 2-year slipped 1 basis point to 0.383 percent by 10:45GMT.

The UK’s second estimate of Q2 GDP showed that the economy shrank by 0.2 percent q/q in, unchanged from the first reading while matching the consensus forecasts, while on an annualized basis, the economy’s growth rate came in at 1.3 percent in Q2, beating investor expectations of 1.2 percent and higher than the 1.2 percent previous reading.

Focus in the first half of the week will no doubt remain on the Conservative Party conference, where populist English nationalism will likely continue to be in full effect, Cabinet ministers will continue to make commitments to big unfunded increases in public expenditure, and Boris Johnson will remain under pressure for a range of issues related to his personal conduct, Daiwa Capital Markets reported.

"We do not, however, expect any light to be shone on Johnson’s Brexit policy. Also, despite suggestions over the weekend that the Scottish National Party is set to back a vote of no confidence in the Government, we doubt that this will go ahead as it would seem to play into Johnson’s hands, the report added," Daiwa further commented in the report.

Meanwhile, the FTSE 100 traded -0.23 percent down at 7,410.45 by 10:50GMT.