UK gilts surge ahead of September employment report, October consumer price inflation data

The UK gilts surged Monday as investors wait to watch the country’s employment report for the month of September, scheduled to be released on November 13 by 09:30GMT. Also, October’s consumer price inflation (CPI) report, due on the following day on November 14 by 09:30GMT will add further direction to the debt market.

The yield on the benchmark 10-year gilts, slumped nearly 4-1/2 basis points to 1.449 percent, the super-long 30-year bond yields suffered 3 basis points to 1.894 percent and the yield on the short-term 2-year too traded 3 basis points lower at 0.747 percent by 09:55GMT.

Following the Q3 GDP announcement last Friday, the flow of key UK economic data releases will continue this week with the latest labour market, inflation and retail sales figures out on Tuesday, Wednesday and Thursday respectively. Headline wage growth picked up in the three months to August, and further increases are on the cards in September, Daiwa Capital Markets reported today.

Excluding bonuses, growth will probably be a touch stronger at 3.1 percent 3m/y, unchanged from August. This notwithstanding, this report is likely to show that the period of subdued employment growth continued. The headline three-month pace dropped to around zero in the last two months, and while probably somewhat higher reading for September can be seen, it should be far from the triple-digit increases often seen in the first half of the year, the report added.

The weaker employment growth should leave the headline unemployment rate unchanged at 4 percent. With regard to inflation data, little change is expected, with headline and core rate remaining at 2.4 percent y/y and 1.9 percent y/y.

"Risks to the former appear to be skewed to the upside given that energy inflation should take another step up due rises in auto fuel prices as well as gas and electricity tariffs. Finally, the figures from the retail sector will be of no less interest. After a period of strong growth over the summer months in September, the annual pace eased to a four-month low of 3.0 percent y/y and it appears likely that we will see a further moderation in October," the report commented.

Meanwhile, the FTSE 100 traded 0.18 percent higher at 7,117.75 by 10:05GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -155.99 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex