Gilts are trading modestly higher, with the...>

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