UK gilts surge after December GDP sharply declines; CPI data eyed

The United Kingdom’s gilts surged during European trading hours Monday after the country’s gross domestic product (GDP) for the month of December sharply declined, accompanied by a similar fall in Britain’s November manufacturing production.

Investors will however, now, keep a close eye on the consumer price inflation (CPI) for December and the retail sales, all due for release later this week for further direction in the debt market.

The yield on the benchmark 10-year gilts, slumped nearly 3 basis points to 0.744 percent, the 30-year yield edged tad 1/2 basis point down to 1.252 percent and the yield on the short-term 2-year plunged over 6 basis points to 0.476 percent by 10:40GMT.

The sharp decline in GDP in December is partly due to some activity being brought forward before the October 31 Brexit deadline, but nonetheless leaves the economy on course to contract by 0.1 percent q/q in Q4 as a whole, Capital Economics reported.

Revisions to previous months meant the 3m/3m rate was a stronger than expected at 0.1 percent (consensus -0.1 percent), down from 0.2 percent in October. But the annual growth rate fell from 1.0 percent to a fresh seven-and-a-half-year low of 0.6 percent, the report added.

Lastly, manufacturing output fell by 1.7 percent m/m and services contracted by 0.3 percent m/m, perhaps as some activity was brought forward before the Brexit deadline.

Meanwhile, the FTSE 100 remained tad 0.53 percent up at 7,627.76 by 10:45GMT.