Gilts have seen decent 2-way flow in...>

GILT SUMMARY: Gilts have seen decent 2-way flow in London morning session but

remain modestly lower with yield curve bear flattening as short-end comes under

the most pressure following surprise upward revision to UK Q1 GDP.

- 2-yr Gilt yield is +1.1bp at 0.711%, 5-yr +1.3bp at 1.014%, 10-yr +0.9bp at

1.264%, 30-yr unch at 1.722% & 50-yr unch at 1.563% according to Tradeweb.

- Gilts were under pressure from the get-go, weighed by overnight agreement on

EU migration and then fell sharply in knee-jerk reaction to Q1 GDP being revised

to 0.2% q/q from 0.1% q/q, thanks to a much smaller drag from the construction

industry and a smaller trade balance deficit. The short-end sold off more than

the ultra-long end as markets priced in higher chance of BoE raising rates in

August.

- Gilts quickly pared losses though as Michel Barnier said that progress had

been made in Brexit negotiations but that "huge and serious differences" remain

and time is running short. Newswire headline that Trump may pull US out of the

WTO then added further bid to long-end Gilts.

- Sstg futures are steady to 2 ticks lower, but well off session lows.