UK gilts narrowly mixed ahead of BoE’s monetary policy decision, Governor Carney’s speech

The UK gilts remained narrowly mixed during European session Wednesday ahead of Bank of England’s (BoE) monetary policy meeting, scheduled to be held on June 21 and Governor Mark Carney’s speech, following the decision, for added direction in the debt market.

The yield on the benchmark 10-year gilts, remained tad lower at 1.27 percent, the super-long 30-year bond yields rose slightly to 1.75 percent and the yield on the short-term 2-year traded 1 basis point lower at 0.69 percent by 10:30GMT.

Ahead of tomorrow’s BoE policy announcement, today’s main UK focus will be political, with Theresa May potentially facing the most significant parliamentary defeat of her leadership. That could occur as the EU Withdrawal Bill is discussed again in the House of Commons. In particular, MPs will consider another amendment inserted by the House of Lords on Monday on a ‘meaningful vote’ on a Brexit deal that could, crucially, give parliament more influence over the final stages of an agreement. The issue relates to an initial proposed amendment which the government successfully fended off last week after reportedly promising concessions to rebel MPs.

However, May allegedly subsequently backtracked on this under pressure from pro-Brexit colleagues, prompting the Lords to attempt to force her hand by inserting a new proposal along similar lines. She, and her colleagues, will have been pressuring MPs not to back this amendment but there is a significant risk she will be defeated. While this would reduce the chances of the UK leaving the EU without a deal, it would also greatly increase the chances of a political crisis, and the removal of May.

Lastly, the EU Parliament's Brexit coordinator Guy Verhofstadt will appear in front of a panel of UK MPs, and his words will be closely watched. With negligible progress made since the March EU summit, a deal, as initially hoped, looks virtually impossible before next week’s Council meeting. And while our central expectation is for a broad deal to be in place before October’s Council meeting, there is a growing fear that the talks may drag on past that date.

Meanwhile, the FTSE 100 traded 1.05 percent higher at 7,680.68 by 11:10 GMT, while at 11:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -41.62 (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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