UK gilts suffer after PM May survives no-confidence vote; Brexit drama continues to intensify

The United Kingdom’s gilts suffered during Thursday’s afternoon session Prime Minister Theresa May survived a no-confidence vote yesterday at the House of Commons, triggered by opposition Labour Party leader Jeremy Corbyn. However, the drama around Brexit continues to pour fears and uncertainty around the exact timing of exit from the European Union.

The yield on the benchmark 10-year gilts, rose nearly 1 basis point to 1.311 percent, the super-long 30-year bond yields surged nearly 2 basis points to 1.831 percent and the yield on the short-term 2-year traded nearly 2 basis points higher at 0.835 percent by 09:30GMT.

While May predictably won yesterday’s confidence vote in Parliament, the result highlighted the PM’s dependence on the backing of the Northern Irish DUP for her survival (with the Northern Irish votes she’d have lost) as well as her vulnerability to mutiny within her own party. So, she appears to have very limited room for manoeuvre as she resumes discussions today with various political groupings in an attempt to find a Parliamentary majority in favour of one form of Brexit or another.

All this Brexit uncertainty, of course, continues to take its toll on the UK economy. The latest example came from today’s RICS Residential Market Survey, which pointed to intensifying downward pressures on house prices at the end of last year, with a net balance of 19 percent of survey respondents reporting falling prices in December and prices in decline in all regions bar the North-West. The weakness persisted on both sides of the market with indicators for new buyers enquiries and new vendor instructions remaining firmly in the negative territory, at -17 percent and -21 percent respectively, Daiwa Capital Markers reported.

Meanwhile, the FTSE 100 fell 0.55 percent to 6,825.00 by 09:35GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 119.59 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex