Gilts have bounced off from higher.....>

GILT SUMMARY: Gilts have bounced off from higher than expected retail sales

induced lows, but remain under par, weighed by fall in German Bunds as market

position for key ECB monetary policy decision with risk central bank announces

end of QE today. Curve is modestly flatter as ultra long-end outperforms

short/long-end.

- 2-yr Gilt yield is +1.7bp at 0.753%, 5-yr +1.6bp at 1.09%, 10-yr +1.4bp at

1.372%, 30-yr +0.2bp at 1.803% & 50-yr -0.4bp at 1.615% according to Tradeweb.

- Sep Gilt future opened lower, recovered lost ground ahead of retail sales

data, but then fell sharply as total sales jumped 1.3% in May, thanks to warm

weather and the Royal wedding. Gilts then bounced off lows as move looked

overdone and markets priced in likely pay-back in sales next month. Ultra

long-end was the main beneficiary from the bounce while short-end remained under

pressure.

- Sstg remains in the red with strip steeper as blues contract by 2 ticks while

whites are unch to 1 tick lower. Breakevens are 0.5 to 1bp tighter but swap

spreads are little changed. Markets now eye ECB decision.