Gilts settled lower, underperforming world peers as a hawkish outlook from the Bank of England in the previous session encouraged caution ahead of today’s retail sales report.

An unexpected fall in United States weekly jobless figures added negative sentiment in thin trading because of a holiday in many European markets. US benefit claims fell for the fifth week in a row to the lowest in more than a year, suggesting that the labour market has been tightening and that fears over consumer spending may be overdone.

The June long gilt future settled 20 ticks lower at 106.31, lagging its European counterparts. Yields on ten-year gilts rose nearly three basis points to 5.15 per cent.

The December short sterling contract hit a new contract low below 94.00 in reaction as increasing numbers of investors hedged against interest rates rising 50 basis points to 6 per cent by the end of the year.

With no top-tier British data crossing the screens, the focus was on today’s retail sales report for the unusually hot April. Economists expect sales to rise 0.5 per cent for the month.

The BoE signalled on Wednesday that interest rates would almost certainly have to rise again to bring inflation under control.

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