Gilts have gradually faded earlier.....>

GILT SUMMARY: Gilts have gradually faded earlier losses during the London

afternoon session but remain in negative territory heading into Wednesday's

close with markets looking ahead to key Bank of England monetary policy

announcement and release of latest quarterly inflation report tomorrow.

- The 5-yr to 10-yr part of the yield curve are leading the underperformance,

in-part weighed by 10-yr Gilt supply and continued upward movement in price of

oil on back of US withdrawal from Iran nuclear deal. 10-yr Gilt yield last 2.1bp

higher at 1.46%.

- BoE is widely seen keeping rate on hold Thursday following BoE Carney comments

and run of disappointing data, however, markets attention will be on number of

dissenters (if any) and tone of the minutes and inflation report.

- Short Sterling strip has pared around half of its earlier sell-off, supported

by some micro-curve flattening trades and outright buying in Red contracts.

White contracts now 1-3 ticks lower and reds 2-3 ticks lower.

- 10-yr and 30-yr breakevens have reversed earlier widening move and are now 

0.5bp tighter, while swap spreads are mixed with long-end ~1bp wider.