UK gilts strengthen as investors wary ahead of 10-year auction

The UK gilts strengthened Tuesday as investors remained cautious ahead of the 10-year auction. The yield on the benchmark 10-year gilts, which moves inversely to its price, fell 4 basis points to 1.39 percent, the super-long 40-year bond yield dipped 3 basis points to 1.82 percent and the yield on short-term 3-year slid 3 basis points to 0.27 percent by 09:50 GMT.

The UK gilts have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield tumbled 4 basis points to 2.29 percent.

The British Prime Minister May said that she wants to cut corporation tax to the lowest among the world’s 20 largest economies and could cut tax to lower than 15 percent.

Crude oil prices recovered on rising consensus that the OPEC will find a way to reduce production. The International benchmark Brent futures rose 1.33 percent to $49.55 and West Texas Intermediate (WTI) jumped 1.08 percent to $48.76 by 09:30 GMT.

According to Bloomberg, the U.K Debt Management Office will sell an additional 4.25 billion pounds of gilts in fiscal 2016/17 on top of 131.5 billion pounds targeted in March. They expect more expansion in short-term debt of 5.05 billion pounds of bills, under the new issuance target given after Chancellor of the Exchequer Philip Hammond presents his debut mini-budget on Wednesday.

Lastly, investors remain keen to focus on the upcoming third quarter GDP data.

Meanwhile, the FTSE 100 traded 0.92 percent higher at 6,835 by 10:00 GMT. While at 10:00 GMT, the FxWirePro's Hourly GBP Strength Index stood neutral at +43.40 (higher than +75 represents purely bullish trend).