UK gilts trade in tight range as investors await 30-year auction, BoE’s Haldane’s speech

The UK gilts traded in a tight range Monday as investors remain cautious ahead of the country’s super-long 30-year auction and the Bank of England (BoE) member Haldane’s speech, scheduled for July 25 at 09:35GMT and 17:00GMT respectively.

The yield on the benchmark 10-year gilts, hovered around 1.18 percent, the super-long 30-year bond yields slipped barely 1 basis point to 1.81 percent and the yield on the short-term 2-year traded flat at 0.26 percent by 09:50 GMT.

The coming week in the UK also brings the preliminary release of Q2 GDP figures, due on Wednesday. The latest economic indicators have been quite mixed – for example, retail sales rebounded after a notable drop at the start of the year, but other areas of consumer spending have been discouraging. Indeed, new car sales have fallen sharply, and momentum in the housing market has moderated.

And while on average the PMIs were broadly unchanged in Q2, industrial production figures for May brought a significant downward surprise, with output down by more than 1.0 percent 3m/3m. So overall, only a small increase in GDP growth can be expected to 0.3 percent q/q in Q2 from 0.2 percent q/q in Q1, Daiwa Capital Markets reported.

But against the backdrop of mixed economic indicators of late, the possibility of a higher reading cannot completely be rejected, which could potentially reinvigorate speculation of monetary policy tightening over the coming months. Among other releases in the coming week, the CBI will release its quarterly Industrial Trends and monthly Distributive Trades surveys tomorrow and Thursday, while the BBA lending figures from major retail banks are set to come out on Wednesday.

Meanwhile, the FTSE 100 slumped 1.07 percent to 7,372.75 by 09:50 GMT, while at 09:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -113.69 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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