Gilts are trading modestly lower.......>

GILT SUMMARY: Gilts are trading modestly lower across the curve having reversed

earlier squeeze higher, as they take cue from fall in German Bunds in wake of

comments from ECB Nowotny -- "would not overdramatize Euro's rise vs US Dollar".

- 2-yr Gilt yield is +1.4bp at 0.189%, 5-yr +1.3bp at 0.454%, 10-yr +1.7bp at

1.051% and 30-yr +1.8bp at 1.716% according to Tradeweb.

- Gilts opened on the soft side, but slowly regained lost ground and ticked

higher but volume was light with majority in the markets seen side-lined ahead

of key US non-farm payroll and average weekly earnings data.

- Gilts pared gains though and head back toward unchanged levels as UK

manufacturing PMI surprised to the upside, rising to 56.9 in August vs an

upwardly revised 55.3 in July.

- The future broker back into negative territory, taking cue from nudge lower in

German Bunds as France announced long-end supply for next week. Another spike

lower in Bunds in wake of Nowotny comments on the Euro then saw Gilts drop to

fresh session lows.

- Swap spreads are mixed, while breakevens are marginally wider.