UK gilts nearly flat after fall in August retail sales, BoE’s unchanged policy decision

The United Kingdom’s gilts remained nearly flat during European trading hours Thursday, after the country’s retail sales for the month of August fell, albeit meeting market expectations. Also, the Bank of England’s (BoE) monetary policy decision remained unchanged unanimously, which barely impacted debt markets.

The yield on the benchmark 10-year gilts, remained flat at 0.642 percent, the 30-year yield suffered nearly 1-1/2 basis points to 1.050 percent and the yield on the short-term 2-year too remained steady at 0.512 percent by 11:05GMT.

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2 percent inflation target, and in a way that helps to sustain growth and employment. At its meeting today, the MPC voted unanimously to maintain Bank Rate at 0.75 percent.

The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion. The Committee also voted unanimously to maintain the stock of UK government bond purchases, financed by the issuance of central bank reserves, at £435 billion.

Brexit-related developments are making UK economic data more volatile, with GDP falling by 0.2 percent in 2019 Q2 and now expected to rise by 0.2 percent in Q3. The Committee judges that underlying growth has slowed, but remains slightly positive, and that a degree of excess supply appears to have opened up within companies.

Brexit uncertainties have continued to weigh on business investment, although consumption growth has remained resilient, supported by continued growth in real household income. In all circumstances, the Committee will set monetary policy appropriately to achieve the 2 percent inflation target. The MPC judges at this meeting that the existing stance of monetary policy is appropriate.

Meanwhile, the FTSE 100 traded 0.53 percent up at 7,351.52 by 11:10GMT.