UK gilts nearly flat in subdued trade, markets await Fed Chair Yellen’s testimony

The UK gilts traded nearly flat Thursday, succumbing to thin trading activity as investors await the Federal Reserve Chair Janet Yellen testimony, in an attempt to estimate the Fed's most likely policy step.

The yield on the benchmark 10-year gilts, which moves inversely to its price, hovered around 1.38 percent, the super-long 30-year bond yield remained steady at 2 percent and the yield on short-term 2-year climbed 1/2 basis point to 0.195 percent by 10:40 GMT.

Retail sales in the United Kingdom grew at the highest pace in 14 years, following the surge in shopping spree by Britons on the eve of Halloween. Also, a colder weather lifted sales of winter clothes and supermarket necessities.

Retail sales volumes jumped by 1.9 percent on the month in October after edging up 0.1 percent in September, data released by the Office for National Statistics showed Thursday, almost double the highest forecast in a Reuters poll of economists.

Further, compared with a year earlier, sales volumes were up 7.4 percent last month versus forecasts for a 5.3 percent rise and 4.2 percent growth recorded in September, the biggest annual rise since April 2002. Clothing sales gained 5.1 percent on the month, their biggest rise since March 2014, while internet sales were more than a quarter higher than in October 2015.

In addition, a 26.8 percent annual rise in the value of Internet sales was the biggest since January 2011. However, a revival in the country’s retail sales may not hold good to offset the ongoing resilience after the Brexit vote on June 23.

Longer term, the Bank of England and many other economists are concerned that rising prices will reduce households' disposable income, and Thursday's figures also showed store prices falling at the slowest pace since July 2014, Reuters reported.

Meanwhile, the FTSE 100 traded 0.36 percent higher at 6,775.30 by 10:40 GMT. While at 10:00 GMT, the FxWirePro's Hourly GBP Strength Index stood neutral at +15.25 (higher than +75 represents purely bullish trend).