Compounding concerns over the global...>

GILT SUMMARY: Compounding concerns over the global economic outlook, the UK data

flow disappointed this morning with house growth slowing sharply in December and

mortgage approvals edging lower. The uptick in the Services PMI to a borderline

expansionary 51.2 for December offers scant consolation. 

- Gilts have sold off since the open, but have pulled back since mid-morning.

The 7- and 10-year benchmarks have underperformed the curve with yields up 4.3pp

on the day.

- The 2s10s spread has widened to 49.9bps from a low of 47.1bps while 2s30s has

lacked direction.

- The Mar 19 gilt future trades at 123.54, down 37 ticks from the high and near

the lows of the day.

- Inflation breakevens have rebounded sharply having been under pressure since

mid-February. The 5-year benchmark trades at 3.124% off a low of 3.084%.

- Short sterling futures are 1.0-3.0 ticks lower with the strip steepening

slightly as a result of greens/blues underperforming.