Gilts are holding onto early morning...>

GILT SUMMARY: Gilts are holding onto early morning gains despite the better than

expected first estimate of UK Q4 GDP and sharp falls seen in front-end of the

German yield curve. UK's own yield curve is flatter as long-end outperforms.

- 2-yr Gilt yield is -0.2bp at 0.597%, 5-yr -0.7bp at 0.922%, 10-yr -1.1bp at

1.401%, 30-yr -1.3bp at 1.872% and 50-yr -1.0bp at 1.658%

- Gilts opened positively and then squeezed higher likely on the back of renewed

domestic political risks as Tory Brexiteers are not happy with either David

Davis handling of the negotiations or with comments made by Chancellor Philip

Hammond. While according to the Guardian there are rumours of another possible

Tory coup to oust PM May.

- Gilts, especially the short-end pared gains in knee-jerk reaction to higher

than expected rise in UK 1st estimate of Q4 GDP (0.5% q/q vs 0.4% q/q expected),

thanks to rise in business services. However regained about half of losses as

underlying Brexit/political concerns continue to underpin bid. Even the sharp

sell-off in German Bunds did not impact Gilts too much.

- Breakevens are modestly wider while swaps spread are mixed with 2-yr -5bps