UK gilts slump post BoE’s Financial Stability Report; Q1 GDP eyed by investors

The UK gilts slumped Tuesday after the Bank of England (BoE) released its Financial Stability Report (FSR) for the month of June. Also, the release of Q1 GDP by the end of this week is closely eyed by investors for detailed direction in the debt market.

The yield on the benchmark 10-year gilts, rose nearly 1/2 basis point to 1.00 percent, the super-long 30-year bond yields also climbed 1/2 basis point to 1.68 percent and the yield on the short-term 2-year traded nearly 2 basis points higher at 0.25 percent by 10:00 GMT.

According to the BoE’s latest Financial Stability Report, the central bank stands ready to slash the buffer if conditions deteriorate and will tighten mortgage affordability tests for lenders. The report said that corporate bonds and commercial properties are vulnerable to re-pricing and that it plans to raise banks' minimum leverage ratio requirement to 3.25 percent of exposures excluding CB reserves from 3 percent.

Lastly, Friday will remain in the limelight, when the final Q1 GDP figures are released. While the BoE anticipates an upwards revision, the data is expected to confirm the previous estimate of 0.2 percent q/q, representing a 0.5ppt slowdown from the pace of growth in Q4 2016. Also of note on Friday will be the current account figures, expected to show an increase in the current account deficit in Q1 after a notable drop at the end of the year.

Meanwhile, the FTSE 100 traded 0.07 percent lower at 7,441.75 by 09:50 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -11.64 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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