UK gilts suffer after BoE’s unchanged policy decision fails to create major market impact

The United Kingdom’s gilts suffered during European trading hours Friday, after the Bank of England’s (BoE) unchanged monetary policy decision did not create any major economic impact on markets, thus making investors trade on the sidelines.

The yield on the benchmark 10-year gilts, rose 1 basis point to 0.647 percent, the 30-year yield remained flat at 1.055 percent and the yield on the short-term 2-year surged 1-1/2 basis points to 0.532 percent by 10:10GMT.

The pound has accelerated higher overnight – extending the recovery after setting new 3-year lows at the beginning of this month, now up ~5 percent. The move triggered by comments from outgoing EU Commission President Juncker (his term finishes on October 31) commented that a no-deal Brexit would have “catastrophic consequences”, that he was doing “everything to get a deal” and "if the objectives are met, all of them, then we don't need the backstop", Lloyds Bank reported.

"While the comments continue to fuel optimism, there is still a long way to go and it would only take a negative comment to knock the pound back in the current less liquid environment," the report further commented.

The Bank of England’s Monetary Policy Committee (MPC) has set monetary policy to meet the 2 percent inflation target, and in a way that helps to sustain growth and employment. At its meeting today, the MPC voted unanimously to maintain Bank Rate at 0.75 percent.

The Committee voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £10 billion.

Meanwhile, the FTSE 100 traded tad higher at 7,361.61 by 10:20GMT.