Bonds: Gilts edge higher as MPC sounds more positive note on economy

These were the movements among some of the most widely-followed 10-year sovereign bond yields:

US: 2.39% (-2bp)
UK: 1.16% (-1bp)
Germany: 0.43% (+1bp)
France: 0.88% (+3bp)
Spain: 1.65% (+4bp)
Italy: 2.29% (+4bp)
Portugal: 3.39% (-1bp)
Greece: 5.63% (-1bp)
Japan: 0.05% (+1bp)

Gilts edged slightly higher on Thursday despite a slightly more positive outlook on economic growth from the Monetary Policy Committee, which pushed yields down a tad.

Due to the move lower in the yield curve for Gilts in the run-up to the drafting of the latest quarterly Inflation Report, the MPC sounded a more hawkish-sounding tone, but to an extent that appeared to be an attempt to 'lean against' the recent drop in market interest rates.

Nonetheless, the UK economy's output gap was now seen closing during the final year of the MPC's forecast period, with the Old Lady on Threadneedle Street striking a more positive note on the medium-term outlook for Britons' real income growth and for the current level of the household savings rate, which ONS expects to revise higher in coming months.

Lest anyone get too carried away, Governor Mark Carney described the expected path for some of the economy's critical variables as "sub-optimal".

All of the above, of course, was under the assumption of a smooth Brexit process, the MPC said.

Later in the day, Stateside, both initial weekly unemployment claims and factory gate price data for April came in stronger than expected.

Of note, traders picked up on a fresh cyle-low in weekly continuing claims, which printed at 1.918m, the least since 1988.

In the euro area, European Central Bank chief economist Peter Praet told Trends/Tendances political risks were decreasing but policy uncertainties around Brexit, together with a separate wide array of risks.

"Policy uncertainties still persist – Brexit, for example. We've seen how negotiations can swing very fast from one side to the other. And as far as the economy is concerned, there's still a wide array of risks. They're moving towards a more balanced configuration, but are still tilted to the downside," Praet said in his interview.