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BOE

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SCHATZ

Block trade

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GILTS
GILTS: Gilts are trading modestly higher, with the 10-year part of the yield
curve outperforming, supported by surprise downward revision to UK year-on-year
GDP growth, while dismissing hawkish comments from BoE Governor Mark Carney.
Prices are off session best levels though as market sees over reaction to soft
GDP data.
- 2-yr Gilt yield is -1.7bp at 0.442%, 5-yr -2.6bp at 0.776%, 10-yr -2.8bp at
1.354% and 30-yr -2.4bp at 1.13% according to Tradeweb.
- Gilts opened around 15bp lower across the curve and then edged higher despite
comments from BoE Carney in a BBC Radio 4 interview saying that if the economy
continues on its current path "in the relatively near-term you can expect
interest rates will increase somewhat".
- The big move higher though was reserved for final Q2 GDP data that showed the
economy grew at 0.3% q/q, however there was a downward revision to the yearly
figure to 1.5% from 1.7%, while the all important service sector contracted 0.2%
in July. The only bright spot was the rise in business investment.
- 5-yr breakevens are 1bp tighter while 10-yr swaps spreads are 1bp wider at 4.5