UK gilts trade nearly flat amid mixed economic data; Carney’s speech in focus

The UK gilts traded nearly flat Wednesday after data showed that the country’s industrial production data came mixed in July.

The yield on the benchmark 10-year gilts, which moves inversely to its price, hovered around 0.660 percent mark, the super-long 40-year bond yield remained steady at 1.186 percent and the yield on short-term 2-year bond rose 1/2 basis point to 0.101 percent by 10:40 GMT.

The British industrial production increased 0.1 percent m/m in July, the market was expecting a fall of 0.2 percent m/m, from up 0.1 percent in June. On an annual basis, it jumped 2.1 percent y/y, higher than the market consensus of 1.9 percent y/y, as compared to 1.4 percent in the same period year ago.

On the other hand, manufacturing output fell 0.9 percent m/m, dipped higher the market expectations of 0.4 percent m/m fall, from down 0.2 percent in June. On an annual basis, it rose 0.8 percent y/y, lower than the consensus of 1.7 percent y/y increase, from previous 0.6 percent. This will be seized on by BoE MPC members as building the case for additional monetary stimulus in November.

On Tuesday, the United Kingdom BRC August retail like-for-like sales fell -0.9 percent y/y, against market expectation of 1.4 percent y/y rise, from up 1.1 percent in July. On a total basis, sales declined 0.3 percent, against a 0.1 percent increase in August 2015.

This is the weakest performance since September 2014, excluding Easter distortions. On a three-month basis, total UK retail sales rose 0.6 percent, half the rate of the 12-month average of 1.2 percent.

Lastly, investors will remain keen to focus on the next week's ECB meeting, when there is a chance of another small deposit rate cut. The market will now look ahead to the MPC Member Cunliffe speech, BoE Governor Carney speech, inflation report hearings, NIESR GDP estimate, inflation expectations and trade balance.

Meanwhile, the FTSE 100 traded 0.10 percent higher at 6,832.70 by 10:40 GMT.