UK gilts suffer after risk appetite returns on de-escalation of Middle East crisis

The United Kingdom’s gilts edged tad lower during European trading hours Thursday after investors’ risk appetite returned to markets following de-escalation of political crisis in the Middle East.  

The yield on the benchmark 10-year gilts, fell 1-1/2 basis points to 0.802 percent, the 30-year yield also lost close to 1-1/2 basis points to 1.270 percent and the yield on the short-term 2-year plunged 4-1/2 basis points to 0.591 percent by 10:00GMT.

This morning’s BRC retail sales monitor for the end of 2019 was unsurprisingly weak. While there was inevitably a bounce back in sales growth in December, with total sales growth up 6.3ppts to 1.9 percent y/y and like-for-like sales growth at 1.7 percent y/y, this reflected special factors related to the inclusion of the Black Friday discounting period that month compared with November in 2018, Daiwa Capital Markets reported.

Certainly, when smoothing out monthly volatility, today’s release implied continued underlying weakness in consumption – i.e. total sales were down 0.4 percent 3m/y in Q4 – suggesting a moderation in consumption growth from Q3. And over the year as whole, 2019 saw the first annual decline in BRC sales since records began in 1995, highlighting the major challenges facing the High Street, the report added.

Meanwhile, the FTSE 100 remained 0.64 percent up at 7,623.07 by 10:05GMT.