Gilts have reversed earlier opening....>

GILT SUMMARY: Gilts have reversed earlier opening and are now trading modestly

higher with the yield curve flattening as long-end outperforms as markets

concerns over health of the consumer continue to rise outweigh a more stable

domestic political environment.

- 10-yr Gilt yield is 1.7bp lower at 1.227%, with 2s/30s 1.6bp flatter

- Gilts opened lower, taking cue from fall in Bunds and as markets took news

that PM May will carry out a cabinet reshuffle as positive and confirmed that

her position as PM was more stable for now. The Telegraph reporting that Boris

Johnson, Phillip Hammond and David Davis will all be keeping their roles as

Foreign Secretary, Chancellor and Brexit Secretary respectively, also helped.

- Gilts quickly pared losses and rallied higher as there was further evidence

that negative real wage growth was having an impact on consumer spending, with

VISA reporting a 1% fall in spending in Dec, leading led to a -0.3% fall in

2017, the first since 2012.

- Breakevens are steady with exception of 5-yr which is 0.8bp wider, while 2-yr

swap spreads continue to see wild swings and is 2.9bp wider at 32bps.