UK gilts trend higher following PM May’s comments

The UK gilts trended higher Monday following a speech by Prime Minister Theresa May that mentioned that Britain would definitely leave membership of the European Union and added that it cannot keep "bits of EU membership". Further, the GBP is under pressure this morning due to a re-focus around a harder exit from Europe.

The yield on the benchmark 10-year gilts, which moves inversely to its price, fell 4 basis points to 1.34 percent, the super-long 30-year bond yield also plunged 4 basis points to 1.98 percent and the yield on short-term 2-year slid 4 basis points to 0.17 percent by 9:40 GMT.

The British gilts 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. Crude oil prices fell on increased exports by Iran, coupled with a higher U.S. oil rig count. The International benchmark Brent futures fell 1.58 percent to USD56.23 and West Texas Intermediate (WTI) plunged 1.39 percent to USD53.24 by 9:45 GMT.

Further, according to the latest Citi/YouGov survey, UK’s inflation expectations for the short term are broadly steady at 2.4 percent whilst expectations for the longer term have risen to 3.0 percent up from 2.8 percent in November.

Meanwhile, the FTSE 100 hit record high of 7,228.25 by 9:50 GMT, while at 9:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -154.23 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex