UK gilts plunge despite worse-than-expected March retail sales data; BoE’s MPC members’ speech in focus

The UK gilts plunged during European session Thursday despite a worse-than-expected reading of the country’s retail sales data for the month of March released today. Market participants shall now be focussing on a host Bank of England (BoE) members’ speech, due today and tomorrow for further direction in the debt market.

The yield on the benchmark 10-year gilts, jumped 5 basis points to 1.46 percent, the super-long 30-year bond yields surged 4-1/2 basis points to 1.86 percent and the yield on the short-term 2-year traded nearly 2-1/2 basis points higher at 0.87 percent by 10:15GMT.

Underlying retail sales (excluding auto fuel) fell by 0.5 percent last month to deliver a bigger drop than markets expected. The prospect of a fall in March retail sales had been expected, not least because of the wintry weather conditions that hit the country in March, which reduced retail store footfall, but also coming after a relatively buoyant rise in February.

The impact of the poor weather was evident in sales at clothing and footwear stores (-0.7 percent) and fuel sales (-7.4 percent), with the latter pushing headline retail sales down by 1.2 percent on the month. As a result of the decline in March, retail sales recorded a fall of 0.5 percent in Q1 – its first decline since Q1 2017.

Meanwhile, the FTSE 100 traded 0.28 percent higher at 7,336.25 by 10:20 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -30.01 (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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