Gilts are trading sharply higher.......>

GILT SUMMARY: Gilts are trading sharply higher Wednesday, recovering around half

of the losses seen on Tuesday, likely supported by strong demand seen at

Ireland's 10-yr syndicated deal, disappointing UK construction PMI and short

covering of oversold positions. Once again the 10-yr part of the yield curve is

seeing the largest movement.

- 2-yr Gilt yield is -3bp at 0.471%, 5-yr -4.1bp at 0.752%, 10-yr -5.1bp at

1.235% and 30-yr -4.3bp at 1.797%.

- News of Britain holding informal talks about joining TPP has had little impact

on investors as this is seen as something for another day.

- UK construction PMI dropped to 52.2 from 53.1 in December, but had little

impact on markets, however block buy in G H8 in 3k at 124.39 led to renewed

rally in Gilts breaking through hourly resistance level at 124.58/64. Gilts

extended gains as latest update on Ireland 10-yr syndication showed large

interest.

- 2-yr swap spreads giving up some of its large tightening move seen yesterday

and are 3.9bp wider, while 10-yr and 30-yr breakevens are 0.5bp tighter.