Gilt are trading modestly higher.......>

GILT SUMMARY: Gilt are trading modestly higher yield curve flatter as long-end

outperforms the short end by between 1-2bps. Gilts seen supported by dovish

comments from BoJ Suga and weaker than expected UK retail sales.

- 2-yr Gilt yield is -2.1bp at 0.678%, 5-yr -2.9bp at 1.084%, 10-yr -3.5bp at

1.611%, 30-yr -4.3bp at 1.998% and 50-yr -4.4bp at 1.782%.

- Gilt future opened unchanged but then squeezed higher as markets digested the

reappointment of Kuroda as BoJ Governor for 2nd term and comment from Suga that

they are watching the the currency markets with a greater sense of a concern.

- Gilts then spiked to fresh highs in reaction to UK retail sales rising by only

0.1% in Jan versus 0.5% expected and failing to rebound from Decembers plunge as

supermarket sales slumped by 1%.

- More hard rhetoric from EU Brexit negotiator that you can't put financial

services into a free trade agreement added further weight to bid in Gilts, while

sterling dropped against both US Dollar and Euro.

- UK breakevens are steady to lower, curve flatter as 30-yr is 1.2bp tighter.

While swap spreads are wider across the board with 2-yr +3.5bps.