Gilts have edged lower in a very.......>

GILT SUMMARY: Gilts have edged lower in a very subdued London afternoon session

with little seen to drive the markets as US celebrates Independence Day holiday.

The 5-yr to 10-yr sector is now underperforming the short-end and long/ultra

long-end of the curve. 2s/10s is 0.4bp wider and 10s/30s 0.7bp tighter.

- 2-yr Gilt yield is +3.9bp at 0.729%, 5-yr +4.1bp at 1.026%, 10-yr +4.0bp at

1.284%, 30-yr +3.1bp at 1.735% & 50-yr +3.3bp at 1.587% according to tradeweb

- Gilts were under pressure from the get-go and then extended their sell-off in

wake of stronger than expected UK service PMI which increased the possibility of

BoE raising rates in August.

- It has been rather thin on political headlines today, however, there has been

a lot of twitter chatter about possible outcomes from the UK cabinet meeting at

Chequers on Friday. Most think May will try and force the most 'softest of

Brexits'

- Chance of a rate hike in August has risen to 72% from 64% seen just before the

PMI data according to MNI PINCH, while Sterling futures are 2.5 to 5 ticks

lower. Both breakevens and swap spreads are little changed.