UK gilts rally after February services PMI disappoints

The UK gilts rallied Friday after Purchasing Managers’ Index (PMI) in the services sector for the month of February disappointed market participants.

The yield on the benchmark 10-year gilts, which moves inversely to its price, plunged 2-1/2 basis points to 1.18 percent, the super-long 30-year bond yields also fell nearly 2-1/2 basis points to 1.77 percent and the yield on the short-term 2-year traded lower by 2-1/2 basis points at 0.10 percent by 09:40 GMT.

The Markit/CIPS 'all-sector' PMI fell for a second successive month in February, dropping to a five-month low of 53.7 from 55.1 in January. The readings for the first two months of the year so far suggest the economy will grow by 0.4 percent in the first quarter, markedly lower than the 0.7 percent expansion seen in the fourth quarter of last year.

"A further slowdown in UK business activity growth in February adds to evidence that the economy has lost momentum after the impressive expansion seen at the end of last year. Inflationary pressures remained the highest for six years as firms struggled with rising costs associated with the weak pound, but optimism about the year ahead remained elevated by recent standards," said Chris Williamson, Chief Business Economist, IHS, Markit.

Meanwhile, the FTSE 100 fell 0.30 percent to 7,360.50 by 09:50 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -30.17 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex