Gilts look set to close mixed with.....>

GILT SUMMARY: Gilts look set to close mixed with the short-end and Ultra

long-end reversing earlier losses, while the 5-yr to 10-yr sector remains

slightly under water although well off session lows. There was no real catalyst

seen for the recovery, however sell-off in European Equities and bounce in US

Tsy supported bid in Gilts.

- 10-yr sector remains the worst performer on the curve with yield 2bp higher at

1.531% but down from intra-day high of 1.55% and highest level since May 4,

2016. 2s/10s yield spread is 2.2bp steeper, while 10s/30s is 2bp flatter.

- Gilts did attempt at a recovery following weaker than expected UK January

manufacturing PMI (55.3 vs 56.2 in Dec), however, quickly reversed tract as IHS

Markit/CIPS report showed purchase prices rising at fastest rate in 11-months

and output charges rose at steepest level since April 2017.

- Breakevens reversed earlier widening move and are now between 0.5bp to 1bp

tighter. While swap spreads are mixed with the 2-yr 1.3bp lower at 25.2bps and

the ultra long-end circa 1bp wider.

- Attention now on US non-farm payrolls tomorrow and BoE MPC meeting on Feb 8