17 Feb 2015
UK 10-year Gilt yield edges higher ahead of the inflation data
FXStreet (Mumbai) - The 10-year Gilt yield in the UK advanced to 1.691% from the low of 1.663% ahead of the data in the UK which could show price pressures slowed down in January.
Yields could decline on a weak inflation data
The official data is likely to show a 0.8% month-on-month fall in the UK inflation in January. Year-on-year the inflation rate is seen slowing down to 0.4% from the previous month’s 0.5%. However, the FX markets and the Gilt yields seem to have priced-in the weak inflation. The yields have been stuck in a range of 1.75% to 1.65% despite a hawkish Bank of England Quarterly Inflation report released last week. Thus, yields may rise if the inflation prints in-line with the expectations.
However, a weaker-than-expected data could push the 10-year Gilt yields lower. Moreover, a sharp fall in inflation could delay the interest rate hike in the UK, leading to a fall in Gilt yields.
Yields could decline on a weak inflation data
The official data is likely to show a 0.8% month-on-month fall in the UK inflation in January. Year-on-year the inflation rate is seen slowing down to 0.4% from the previous month’s 0.5%. However, the FX markets and the Gilt yields seem to have priced-in the weak inflation. The yields have been stuck in a range of 1.75% to 1.65% despite a hawkish Bank of England Quarterly Inflation report released last week. Thus, yields may rise if the inflation prints in-line with the expectations.
However, a weaker-than-expected data could push the 10-year Gilt yields lower. Moreover, a sharp fall in inflation could delay the interest rate hike in the UK, leading to a fall in Gilt yields.