Hello and welcome to CantosCharts. My name is James Hughes from spread betting firm CMC Markets.

Today we're going to look at UK gilts. Now there has been a lot of movement in UK gilts since the general election back in May. That was a real key point for UK gilts and we're seeing now yields at these lowest levels for around five years. That is key after what we've seen from the new government and the new coalition in terms of austerity measures as well. All of these things have been moving into really take these yields lower.

Now looking at the chart we have seen, (this is a weekly chart on UK gilts) and over these few weeks here, (this is when we were running up to the general election) we saw them pretty much plateau out. We didn't see too much in the way of movement. Bouncing around in-between really seeing this 432.80 level on the upside acting as the resistance level. We never once broke through that level and of course above that we had the 200 week moving average as well.

So if we did see a break through there, it was looking like it was going to be caught to the upside anyway. We didn't see a move there. We got the results of the general election, then we had another couple of weeks of moving about and then we finally got the coalition government in and as soon as we got the coalition government in we saw these heavy falls on the downside.

Breaking below the 100 week moving average as well, it really did create a pretty good downtrend. We then had the downside level at 349.70, around 349.73 to 350 on the downside there. We bounced off a couple of times.

Again, a lot of people thought the market was going to go, push on and move higher from there, but again we saw a big break on the downside. We're near five year lows on these gilts now and we've got these lows down at the bottom here. Around 3 per cent is the key level that we're looking for. We've come down to that and we are very close indeed at the moment, so there could be a lot of movements in terms of UK gilts soon. But just how much and how far we get the breakouts is going to be key on these instruments.

The breaks below the initial support here were pretty big. Again, the move off of the resistance level at the top was pretty big. Austerity measures still coming in. Of course, in the New Year we're going to have more and more of these austerity measures coming in to move these gilts around, so it's going to be a really interesting time to see exactly where we're going to go. We've seen the breaks. A break below the level here and we could be going even lower than these parts.

But, of course, because these are such low levels, because we're getting towards these five year lows, these two year lows, it's going to be really important that we do then have the move. If we hold onto it, that we jump up higher. If we break, that we go significantly lower. Now the general consensus is that we won't break below these levels, these two year lows. It's going to be an interesting time.

We judge the levels on maybe how many times they've been tested or how long they've been holding. Of course we've got a five year level and we've got a two year level at the moment. If they've been holding for long enough - of course, two years is a long time to be holding for - then we could see it become even harder to break below. Of course we haven't necessarily seen so many tests of the levels, but still, they're going to be really important levels to break.

So a break below 3 per cent is really going to take us lower, but the general consensus is we'll start to bounce. We'll move from the lower levels, push back up to the 350 levels and then start again.

Now from the 350 level, it's going to be interesting again because we'll have the continuation of the downtrend. That's going to be another key level to look out for. So we're really jam packed of levels in UK gilts at the moment.

The yield prices are, of course, so low, so it's going to be the point of what we're trying to look for is the big moves off of either side. We need to see those moves if anyone is going to look at these as a real trading opportunity.

UK gilts aren't necessarily seen as too much of a trading opportunity a lot of the times. They're maybe pushed to the side because of the moves that you get on various different currencies when we see moves like this. So if the moves are happening here, then the moves are happening on the currencies as well. So that will be interesting to move us onto.

But breaks below these levels are going to be key. If we break lower, then of course we're going to be heading towards the five year level we're looking for. A bounce off of this, we're back up to 350 and that's going to be the key point to look out for.

Thank you for listening. My name is James Hughes from spread betting firm CMC Markets. Join us tomorrow when we will be talking about EUR/GBP and just how these moves move onto the GBP chart as well.