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

GILT SUMMARY: Gilts are trading modestly lower, but off session lows, weighed by

risk on flows as Iran says it will remain in the nuclear deal without the US for

now and by 10-yr Gilt re-opening auction. Curve is pivoting around the 10-yr

sector

- Gilt 2-yr yield is +2.8bp at 0.826%, 5-yr +3.6bp at 1.179%, 10-yr +4bp at

1.479%, 30-yr +3bp at 1.89% and 50-yr +2.9bp at 1.686% according to Tradeweb.

- June Gilt future extended opening losses and hit session low of 121.67 just

before raft of UK/European bond supply and as US Tsy 10-yr yield broke back

above 3% level. Decent 10-yr Gilt auction with tail remaining at 0.1bp then saw

the future bounce off lows and currently trade at 121.74.

- Short sterling strip has also sold off this morning with curve steepening as

blue contracts fall 3 ticks despite BRC showing retail sales collapsing in

April. Attention also turning to tomorrows BoE monetary policy decision and

latest quarterly inflation report.

- Swap spreads are mixed, but breakevens are wider by 1-1.5bps as oil extends

its upward trend.