UK gilts steady ahead of December employment report

The United Kingdom’s steadied during European trading hours Monday ahead of the country’s employment report for the month of December, scheduled to be released on February 18 by 09:30GMT.

The yield on the benchmark 10-year gilts, remained flat at 0.625 percent, the 30-year yield remained tad down at 1.107 percent and the yield on the short-term 2-year remained range-bound at 0.532 percent by 13:05GMT.

This week will be a busy one for top-tier UK economic releases, with the December labour market figures (due Tuesday), January CPI and retail sales data (Wednesday and Thursday respectively) and the February flash PMIs (Friday) all likely to play an important role in the considerations of the Bank of England, Daiwa Capital Markets reported.

While employment growth is likely to have slowed in the three months to December from the ten-month high of 208k in November, it is expected to remain in positive territory to leave the unemployment rate unchanged at 3.8 percent, the report added.

But regular earnings growth looks set to have edged slightly lower in the three months to December, to 3.2 percent 3m/y, which would be the softest for fifteen months. This notwithstanding, with the flash estimate of productivity in Q4 set to have remained weak, this would imply still solid unit labour cost growth in the final quarter of 2019.

January’s CPI figures are expected to show that headline inflation increased 0.3ppt from December’s near-three-year low of 1.3 percent y/y on the back of higher energy inflation. The upwards drift in core inflation will, however, be more modest, Daiwa further noted in the report.

Meanwhile, the FTSE 100 traded nearly flat at 7,426.25 by 13:10GMT.