UK gilts trade flat after August construction PMI disappoints investors; 5-year auction in focus

The United Kingdom’s gilts remained flat during European session Tuesday after the country’s construction PMI for the month of August disappointed market expectations, also lower than the previous reading in July.

The yield on the benchmark 10-year gilts, hovered around 1.407 percent, the super-long 30-year bond yields steady at 1.756 percent while the yield on the short-term 2-year traded nearly 1 basis point lower at 0.721 percent by 10:10GMT.

At 52.9 in August, the seasonally adjusted HIS Markit/CIPS UK Construction Purchasing Managers’ Index (PMI) eased from July’s 14-month peak of 55.8, but remained above the crucial 50.0 no-change mark. The latest reading signalled a moderate overall rise in construction output, with the rate of expansion the weakest since May.

"If there is anything positive to note from this month, it would be that the rate of hiring remained strong. However, persistent pressures from skills shortages and slow rates of new orders will continue to hit business optimism still trailing below the survey’s average," said Tim Moore, Associate Director at IHS Markit.

Meanwhile, the FTSE 100 fell 0.14 percent to 7,495.32 by 10:15GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bearish at -99.84 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex