UK gilts slump after September manufacturing PMI beats market estimates; construction PMI in focus

The United Kingdom’s gilts slumped during European session Monday after the country’s manufacturing PMI for the month of September beat market expectations and investors will now be focusing on the construction PMI for the similar period, scheduled to be released on October 2 by 08:30GMT for further insight into the debt market.

The yield on the benchmark 10-year gilts, jumped 2-1/2 basis points to 1.599 percent, the super-long 30-year bond yields surged nearly 3 basis points to 1.941 percent and the yield on the short-term 2-year traded 2-1/2 basis points higher at 0.846 percent by 10:15GMT.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) posted 53.8 in September, following an upwardly revised figure of 53.0 in August (originally published as 52.8). The PMI has remained above the neutral 50.0 mark for 26 months.

September data signalled a broad-based improvement in business conditions. PMI readings for the consumer, intermediate and investment goods sectors all remained in expansion territory, with stronger rates of increase signalled in the latter two industries.

Lastly, business optimism rose in September, with over 53 percent of companies expecting production to increase over the next 12 months. Firms' optimistic outlook was attributed to new capacity, organic growth, improved sales, investment in new equipment and planned new product launches. However, some manufacturers also noted that Brexit and exchange rate movements were making forecasts less certain.

Meanwhile, the FTSE 100 rose 0.09 percent to 7,516.49 by 10:20GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bearish at -89.25 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex