Gilts have rallied strongly in wake....>

GILT SUMMARY: Gilts have rallied strongly in wake of much weaker than expected

UK preliminary Q1 GDP data, with the short-to-medium part of the curve seen

leading the way, and in-turn bull steepening the yield curve with 2s/10s 2.3bp

and 5s/30s 3.6bp wider at 63.7bp and 69.6bp respectively.

- 2-yr Gilt yield is -7.6bp at 0.814%, 5-yr -7.3bp at 1.154%, 10-yr -5.4bp at

1.454%, 30-yr -3.7bp at 1.853% and 50-yr -3.1bp at 1.65% according to Tradeweb.

- 1st estimate of UK Q1 GDP came in at just 0.1% q/q, well below consensus for a

0.3% q/q print and down from +0.4% q/q seen in Q42017, weighed by sharp downturn

in construction. ONS also played down the effect of the cold snap saying that

the fall in construction was mainly in Jan before the bad weather.

- Near-term rate hike expectations collapsed after the UK data with MNI PINCH

now calculating just 19% chance of a 25bp rate hike at May MPC meeting, down

from 56% seen yesterday and down from a near certainty just over 1-week ago.

- There has been a large number of option flow gone through, mainly buying call

spreads/flies for May/June & Sep.

- Breakevens are mixed, while 2-yr and 5-r swap spreads are  2bps wider.