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THOUGHTS ON THE GILT MARKET

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Being a shortened week in the midst of the summer holiday period, trading in the UK gilt market in the next few day...
Being a shortened week in the midst of the summer holiday period, trading in the UK gilt market in the next few days is likely to be very thin. There is also scant domestic economic data for the market to focus on.

However, Friday's purchasing manager's index will generate some interest, closely watched for similarities to the latest CBI industrial trends survey which saw a slight improvement to orders and output intentions. Attention will focus on the overall index which recovered slightly to 52.3 in July, and the prices paid index which remained high at 72.5.

The gilt market will react negatively to any further price pressures in the industrial sector, because of the implied effect upon inflation at all levels in the economy.

Gilts are likely to take their lead from events of a more global nature. Economists believe it unlikely that gilts will advance much further without a significant shock from abroad. This could come in the guise of a number of important US data releases this week.

The latest labour market and GDP data will give some indication of the health of the US economy. (An economy growing more strongly than expected would be bad for global bond markets generally).
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