UK gilts suffer despite lower-than-expected October services PM; 10-year auction in focus

The United Kingdom’s gilts suffered after investors have largely shrugged-off the lower-than-expected fall in the country’s services PMI for the month of October, released today. Market participants will now remain focussed on the 10-year auction, scheduled to be held on November 6 by 10:40GMT for further direction in the debt market.

The yield on the benchmark 10-year gilts, jumped nearly 2 basis points to 1.512 percent, the super-long 30-year bond yields surged 1-1/2 basis points to 1.910 percent and the yield on the short-term 2-year traded nearly 2 basis points higher at 0.816 percent by 10:40GMT.

The seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index dropped to 52.2 in October from 53.9 in September, to signal the slowest rate of business activity expansion since March.

The headline index has posted above the 50.0 no-change value in each of the past 27 months, but the latest reading was the second-lowest since July 2016. Survey respondents noted that heightened economic uncertainty and a soft patch for new work had held back business activity growth.

Looking ahead, the latest survey indicated a moderation in confidence about the outlook for business activity growth. The degree of positive sentiment about the year ahead was the weakest since July 2016. While some firms reported improved optimism.

Meanwhile, the FTSE 100 rose 0.06 percent to 7,098.95 by 10:50GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bullish at 144.42 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex