Gilts are taking cue from opening fall in.....>

GILTS: Gilts are taking cue from opening fall in German Bunds and are trading

modestly lower on a mild reversal of flight-to-quality buying seen on Tuesday.

10-yr Gilt yield is up 1.4bp at 1.244% and is leading the rest of the curve

higher.

- Overnight saw BRC shop price index fall to -1.1% y/y in May from -1.0% y/y in

April, so no sign of shop inflation yet.

- Little further data from the UK today so attention to remain on Italian

politics and release of German inflation data followed by Eurozone consumer

confidence and 2nd estimate of US Q1 GDP.

- Newswires headlines suggesting there is a last minute attempt to form a

government in Italy has stabilised the BTP market and led to a mild risk-on

tone. The hope is that Lega and 5SM form a government to avoid snap elections in

the summer.