Gilts are trading steady to higher,....>

GILT SUMMARY: Gilts are trading steady to higher, with the 5-year part of the

yield curve outperforming despite supply. 5-yr Gilt yield is -1.8bp at 0.77%.

- Gilts opened slightly lower, but very quickly reversed losses and traded at

unchanged levels as markets digested fallout from the "disastrous" speech by UK

PM May yesterday as Telegraph's headline that 30 MPS were plotting to remove her

from office.

- Gilts squeezed higher though with markets seeing little concession being built

into the 5-yr area of the yield curve ahead of 2023 Gilt supply.

- There was a delayed reaction to a tick higher in the tail seen at UK 0.75 2023

Gilt re-opening auction, however, the faded in prices was limited and soon

reversed. DMO sold Stg2.75bln of the 6-yr Gilt at average yield of 0.906% and

covered 2.36 times.

- Breakevens are around 0.8bp higher across the board, while swap spreads are

mixed with 2-yr 2bp wider and 15-yr 1.5bp tighter.

- Attention now turns to a raft of US data and Fed speakers, before comments

from BoE's Ian McCafferty at 1700BST.