UK gilts trade modestly lower on stronger retail sales

The UK gilts traded modestly lower on Friday after data showed that country’s retail sales jumped higher than expected in July. Also, firmer crude oil prices drove out investors from safe-haven buying.

The yield on the benchmark 10-year gilts rose 1 basis point to 0.560 percent, the super-long 40-year bond yield also climbed 1 basis point to 1.117 percent and the yield on short-long 2-year bond bounced 1 basis point to 0.152 percent by 09:50 GMT.

The British retail sales jumped 1.4 percent m/m in July turns out above our above-consensus prediction of 0.9 percent m/m and far exceeds the market consensus expectation of a 0.2 percent m/m increase.

The UK bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of England's target.

The crude oil prices climbed for a seventh straight day, with Brent crude rising above $50 for the first time in six weeks as the world's biggest producers prepared to discuss a possible freeze in production levels. The International benchmark Brent futures rose 0.02 percent to $50.90 and West Texas Intermediate (WTI) jumped 0.27 percent to $48.35 by 09:00 GMT.

Lastly, investors will remain keen to focus on the next week’s second-quarter gross domestic product GDP figure.

Meanwhile, the FTSE 100 traded 0.26 percent higher at 6,852 by 09:50 GMT.