Gilts have found an opening bid,.......>

GILT SUMMARY: Gilts have found an opening bid, taking cue from tiny

rally/recovery in US Treasuries overnight as Japanese markets opened following

Monday's holiday and traders thought about who is likely to be the next Governor

of the Bank of Japan. 10-yr Gilt yield is 1.9bp lower at 1.582% with yield curve

ever so slightly bull steepening.

- There was nothing surprising in latest comments from BoE known hawk Ian

McCafferty last night and sterling saw very little reaction. McCafferty said

that economic growth is holding up and inflation is running significantly above

target.

- Main event today will be release of UK January inflation and producer prices

at 0930GMT. MNI consensus is for headline CPI to remain at 3.0% y/y and for core

CPI to tick higher to 2.6% y/y. Risks are seen as balanced as any upside seen

from airfares look to be offset by fall in fuel prices and a stronger sterling.

- There has been a little movement in UK breakeven this morning, tightening by

around 0.5bps, so markets could be looking for a slightly softer CPI number.