Gilts are trading modestly higher......>

GILT SUMMARY: Gilts are trading modestly higher with the yield curve flatter as

long/ultra long-end outperforms likely on the back of rise in domestic political

risks as Carillion files for liquidation.

- 2-yr Gilt yield is -0.8bp at 0.583%, 5-yr -2.0bp at 0.844%, 10-yr -2.7bp at

1.312%, 30-yr -3.0bp at 1.813% and 50-yr -2.9bp at 1.594%.

- Overall though markets have been quiet due to US cash markets being closed for

Martin Luther King Jr day holiday and lack of Uk and Eurozone data.

- The liquidation of Carillion could impact politics in the UK due to its size

and operations of having many contracts in the public sector including NHS and

schools and is seen as a slight negative for PM May.

- Markets also keeping an eye on the FX markets as weakness in the US Dollar

sees cable temporarily trade above $1.38. Impact on breakevens has been minimal

though with 5-yr only 0.6bp tighter.

- With the US closed main attention will be Bank of England MPC member Silvana

Tenreyro speech in London on the "fall in productivity growth: Causes and

Implications" at 1815GMT.