UK gilts slump on higher growth expectations

The UK gilts slumped on Monday as investors expect the second quarter preliminary gross domestic product (GDP) to grow higher than the economists have forecasted.

Also, stronger economic growth will support the Bank of England (BoE) to raise interest rate as upbeat economy growth will accompany higher inflationary pressure.

The yield on the benchmark 10-year gilts rose 3-1/2 basis points to 0.835 percent, the yield on super-long 30-year bond also jumped 3-1/2 basis points to 1.728 percent and the yield on short-term 2-year bonds climbed 3 basis points to 0.164 percent by 10:00 GMT.

The UK’s national statistical institute is scheduled to release preliminary gross domestic product for the second quarter on Wednesday at 08:30 GMT. The GDP reading is expected to increase 0.5 percent q/q, from previous 0.4 percent q/q. Similarly, it is anticipated to bounce 2.1 percent y/y, as compared to prior 2 percent y/y.

On the contrary, on the back of Brexit, the International monetary fund (IMF) trimmed British GDP growth for 2016 by one percentage point to 1.2 percent, as compared to April forecast of 2.2 percent expansion.

Lastly, investors will remain keen to focus on the latest housing market developments of interest with the release of the BoE mortgage approvals data for June and the Nationwide’s house price indicator for July.

The CBI’s quarterly industrial trends enquiry should indicate how much manufacturing sector confidence and total order books have been rocked by the ‘Brexit’ decision.

Meanwhile, the FTSE 100 trading up 0.07 percent at 6,735 by 10:00 GMT.