UK gilts surge after June construction PMI shrinks further into contraction; BoE’s Carney eyed

The United Kingdom’s gilts surged during European session Tuesday after the country’s construction PMI for the month of June utterly disappointed market participants, failing to meet estimates, as well as shrinking further into contraction mode.

Investors shall now also be focussing on Britain’s services sector PMI, along with a host of speeches by BoE members, all scheduled on July 3 for further direction in the debt market.

The yield on the benchmark 10-year gilts, plunged 5 basis points to 0.762 percent, the 30-year yield slumped 5-1/2 basis points to 1.391 percent, and the yield on the short-term 2-year traded 4-1/2 basis points lower at 0.565 percent by 10:50GMT.

The headline seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index posted 43.1 in June, down sharply from 48.6 in May and below the 50.0 no-change mark for the fourth time in the past five months. Moreover, the latest reading signalled the steepest reduction in overall construction output since April 2009.

The Nationwide house price index for June, released earlier this morning, showed that residential property price growth remained subdued at the end of the second quarter, up just 0.1 percent m/m and 0.5 percent y/y, broadly in line with rates seen earlier this year and well down those of recent years, Daiwa Capital Markets reported.

Meanwhile, the FTSE 100 remained 0.62 percent higher at 7,544.50 by 10:55GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained neutral at -66.77 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex