UK gilts narrowly mixed after services PMI beats expectations in February; investors eagerly await Annual Budget release

The UK gilts remained narrowly mixed Monday after the country’s services PMI for the month of February beat market expectations ahead of the Annual Budget release, scheduled for March 7 by 12:30GMT.

The yield on the benchmark 10-year gilts, slipped nearly 1 basis point to 0.78 percent, the super-long 30-year bond yields remained flat at 1.88 percent and the yield on the short-term 2-year too steadied at 0.78 percent by 09:50GMT.

While attention in the UK will remain on Brexit after Theresa May on Friday set out her preference for a Brexit based on ‘managed regulatory divergence’, the coming week will be a relatively quiet one for UK data.

The highlight will be the publication of the January monthly output data on Friday. For a start, output should see something of a bounce-back from December’s 1.3 percent m/m drop. That fall largely reflected the temporary shutdown of a key North Sea oil pipeline, which led to a massive 24.2 percent decline in oil and gas extraction.

Stripping out that distortion, manufacturing expanded by 0.3 percent m/m in December, and 1.4 percent y/y. But as outlined above, the PMI survey indicates a deceleration in the manufacturing output growth then. Construction output data for January will be released the same day, although the volatile nature of those figures makes them tricky to forecast accurately.

Meanwhile, the FTSE 100 traded 0.38 percent higher at 7,095.50 by 10:15 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 35.12 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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