UK gilts rebound on short covering; investors eye April consumer inflation next week

The UK gilts rebounded Friday as investors covered previous short positions amid a silent session that witnessed data of little economic significance. Also, investors are awaiting the country’s consumer price inflation for the month of April, which will provide further direction in the debt market.

The yield on the benchmark 10-year gilts,  slumped 3 basis points to 1.13 percent, the super-long 30-year bond yields plunged nearly 2 basis points to 1.77 percent while the yield on the short-term 2-year traded 1/2 basis point lower at 0.12 percent by 10:00 GMT.

In line with market expectations, the BoE voted by a majority of 7-1 to keep the Bank Rate unchanged at 0.25 percent and maintain the asset purchase programme at GBP435 billion. The BoE policy decision was accompanied by the release of the policy statement which supported the view that, on the assumption of a “smooth” transition to Brexit, monetary policy will likely tighten by a somewhat greater extent than the market is currently pricing in. 

However, in spite of the modestly hawkish bias of the BoE statement, GBP came under pressure across the board. EUR also remained under pressure against the USD for the third session in a row on the back of recent ECB dovish comments which added to the view that the Central Bank is in no rush to push interest rates higher or/and scale back its monetary stimulus.

Meanwhile, the FTSE 100 rose 0.16 percent or 11.87 points to 7,398.50 by 10:10 GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -159.52 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex