UK gilts slump even as September construction PMI falls lower than expectations; eyes on services PMI

The United Kingdom’s gilts slumped during European trading hours Wednesday even after the country’s manufacturing PMI for the month of September, inched lower, worse than investors’ expectations, as markets still eye Britain’s services PMI for the similar period, due on October 3 for further direction in the debt market, besides, the 10-year auction, also scheduled for release tomorrow.

The yield on the benchmark 10-year gilts, jumped nearly 4 basis points to 0.508 percent, the 30-year yield surged 3 basis points to 0.983 percent and the yield on the short-term 2-year gained 4 basis points to 0.386 percent by 10:25GMT.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted 43.3 in September, down from 45.0 recorded in August and thereby signalling a more severe downturn in building activity across the UK. Moreover, the deterioration was the second-strongest since April 2009 and broad-based across all three broad categories of construction work.

All eyes today in the UK will be on the final day of the Conservative party conference, with PM Boris Johnson supposedly to set out his ‘take it or leave it’ offer to the EU on Brexit. Of course, given Johnson’s habit of being economical with the truth, it’s difficult to know quite how much of what he’ll say today at face value. And his detailed proposals might not be available until tomorrow, when he is set to present them to the House of Commons, Daiwa Capital Markets reported.

Meanwhile, the FTSE 100 plunged 2 percent to 7,215.55 by 10:30GMT.