UK gilts slip ahead of February employment report, March CPI data

The United Kingdom’s gilts slipped during European session Monday ahead of the country’s employment report for the month of February and consumer price inflation (CPI) data for the month of March, scheduled to be released on April 16 and 17 by 08:30GMT respectively.

The yield on the benchmark 10-year gilts, rose 1 basis point to 1.223 percent, the super-long 30-year bond yields remained tad higher at 1.729 percent and the yield on the short-term 2-year traded 1-1/22 basis points higher at 0.797 percent by 10:15GMT.

The flow of first-tier economic data releases will kick off tomorrow with the latest labour market figures. In January employment increased by 222k3M/3M, the biggest rise in more than three years. But with business sentiment surveys having signalled weakening in labour market conditions in recent months, the February data are likely to show a moderation in jobs growth to around 150k3m/3m, Daiwa Capital Markets reported.

The unemployment rate is expected to remain at 3.9 percent, but there is a significant risk of a rise of 0.1ppt. Finally, average weekly earnings growth will likely be little changed from January when it posted a rise of 3.4 percent 3m/y, one of the steepest in recent years, the report added.

On Wednesday, markets will receive the March inflation figures. The CPI rate ticked higher in February to 1.9 percent y/y, but that increase was driven solely by higher energy prices as the core inflation rate decreased by 0.1ppt to 1.8 percent y/y.

"We expect that both the headline and the core rates will have remained unchanged. The holiday-shortened week will end on Thursday with the release of retail sales data. The figures in January and February suggested that the retail sector had a strong start to the year with the average level of sales in these two months up by 1.0 percent compared to Q4. But, in line with the downbeat sentiment surveys from this sector seen recently, we expect the March figures to be much weaker, showing a monthly drop in the volume of sales. Thursday will also bring the Bank of England’s latest quarterly credit conditions survey. Supply-wise, tomorrow the DMO will issue £2.25bn of 2037 Gilts," the report commented.

Meanwhile, the FTSE 100 remained steady at 7,435.75 by 10:20GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at 17.75 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex