Gilts have extended losses in London...>

GILT SUMMARY: Gilts have extended losses in London afternoon trade and look set

to close near session lows, with the yield curve bear steepening as long/ultra

long-end underperforms reversing earlier bear flattening move.

- There has been little seen to trigger the move lower apart from better than

expected US U. Michigan sentiment and comments from Fed Bullard that he has no

problem with inflation overshooting target slightly.

- 2-yr Gilt yield is +1.2bp at 0.785%, 5-yr +1.4bp at 1.131%, 10-yr +2.0bp at

1.441%, 30-yr +1.7bp at 1.868% and 50-yr +2.0bp at 1.668% according to Tradeweb.

- Earlier the Gilt curve bear flattened as the short-end was weighed by comments

from BoE Broadbent that interest rates likely to rise gradually and BoE Carney

saying rise likely by year-end. Although it does depend on incoming data.

- Short sterling strip is steady to lower/steeper as blue contracts fall 2

ticks. There has been some decent buying throughout the day in Jun8 contract

though.

- Breakevens have pared earlier widening move while swap spreads are little

changed with exception of the 2-yr which is 3.1bp tighter at 23.2bps.