The UK gilts slumped Tuesday as recent data showed that the country’s mortgage approvals hit 6-month high in October.
The yield on the benchmark 10-year gilts, which moves inversely to its price, rose nearly 2 basis points to 1.40 percent, the super-long 30-year bond yield climbed 1-1/2 basis points to 2.06 percent and the yield on short-term 2-year bounced 1-1/2 basis points to 0.114 percent by 10:50 GMT.
We continue to foresee that the 10-year gilt yield will increase towards 1.50 percent multi-day.
Mortgage approvals in the United Kingdom hit 6-month high during October, while consumer credit remained highest in the past 11 months, cementing a strong consumer demand and improving wants for houses amid prevailing tension and uncertainties over June’s Brexit vote.
U.K. mortgage approvals increased to 67,518 in October from 63,594 in September, data released by the Bank of England showed Tuesday. Analysts in a Reuters poll had forecasted 65,000 mortgage approvals were made in October.
Total lending to individuals increased by GBP 4.9 billion in October compared to GBP 4.7 billion in September. Within total lending, secured lending rose GBP 3.3 billion, the same increase as seen in September but slightly bigger than the expected GBP 3.2 billion.
Moreover, the British gilts have been closely following developments in oil markets because of their impact on inflation expectations, which is below the target level of Bank of England. Crude oil prices fell on worries that the OPEC will be able to cut production output cut during a meeting on Wednesday. The International benchmark Brent futures fell 1.93 percent to $48.27 and West Texas Intermediate (WTI) dipped 1.93 percent to $46.24 by 10:50 GMT.
The Organization of the Petroleum Exporting Countries (OPEC) is meeting officially in Vienna on Wednesday to discuss a planned production cut in an effort to curb overproduction that has dogged markets and more than halved prices since 2014, Reuters reported.
With a high degree of uncertainty going into the last 24 hours before the meeting, oil price volatility is expected to be high. There remains disagreement among OPEC-members over which producers should cut by how much, and a plan for non-OPEC oil giant Russia to participate has so far also failed, they added.
Meanwhile, the FTSE 100 traded 0.78 percent lower to 6,747 by 10:50 GMT. While at 10:00 GMT, the FxWirePro's Hourly GBP Strength Index remained highly bullish at +103.90 (higher than +75 represents purely bearish trend).
