UK gilt prices rose sharply on Tuesday, reaching an intraday high of 91.88 and closing at 91.58, as disappointing retail sales data strengthened the case for a February rate cut by the Bank of England.
Retail sales contracted 0.3% month-on-month in December, missing economists’ consensus forecast of 0.0%. The weaker-than-expected data raised concerns about a potential GDP contraction in the fourth quarter, adding pressure on the BoE’s Monetary Policy Committee to ease monetary conditions.
The decline in yields reflected growing expectations for rate cuts. The 10-year gilt yield dropped 3 basis points to 4.639%, while the 30-year yield fell 2 basis points to 5.204%, marking their lowest levels in 10 days.
Picture: Long Gilt sees bullish momentum, closing at 91.58 with strong MACD signals and testing resistance near 91.88, as seen on the VT Markets app.
The corresponding rise in gilt prices, as shown in the chart, reflects strong demand for government bonds in a weaker economic environment.
The chart confirms a steady upward movement in gilt prices, with a sharp acceleration starting January 15. The intraday high of 91.88 aligns with a drop in yields, while the MACD shows strong bullish momentum, signalling increased buying interest in UK government bonds.
UK gilt yields are expected to stay under downward pressure as markets anticipate further rate cuts. Long-dated gilt prices may rise toward resistance levels above 91.88 if economic data weakens further.
However, stronger-than-expected data or hawkish signals from the Bank of England could shift the trend, keeping traders on alert.
The sharp rise in gilt prices highlights the impact of weaker economic data and growing expectations of policy easing. Traders will closely monitor upcoming data and BoE commentary for further clues on the direction of gilt yields and prices.
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