Gilts are trading modestly higher in...>

GILT SUMMARY: Gilts are trading modestly higher in early Wednesday morning

trade, paring some of the very heavy losses seen Tuesday as markets look ahead

to UK July labour market data, that includes latest average weekly earnings.

- The curve is slight bull steepening as the short-end is currently

outperforming with 2s/10s 0.3bp wider, however there has been some decent

selling seen in the front end of the short sterling strip as markets price in

higher chance of the Bank of England raising rates by the end of the year.

- Attention is likely to be on UK average weekly earnings data released at

0830GMT, and if real incomes have squeezed even lower. However, MNI median

forecast is for earnings to increase to 2.4% from 2.1%, while ex-bonus is seen

only rising to 2.2% from 2.1%.

- Elsewhere the DMO re-opens 10-year 1.25% 2027 Gilt for Stg2.5bln today, while

the Bank of England continues its APF repurchase operation in the 7-/10-year

category for Stg1.125bln, where there are only 2 Gilts available to buy.

- 2-yr and 5-yr swap spreads are seen 2.5bp wider while the rest of the curve is

little changed. While UK breakevens are currently steady.