Gilts look set to close modestly.......>

GILT SUMMARY: Gilts look set to close modestly higher reversing opening and

lunchtime losses, supported by soft UK and German data and move higher in US

Treasuries. The 10-yr part of the yield curve has outperformed the rest of the

curve.

- 2-yr Gilt yield is +0.2bp at 0.678%, 5-yr -1.3bp at 1.029%. 10-yr -1.8bp at

1.537%, 30-yr -0.9bp at 1.931% and 50-yr -1.2bp at 1.715%.

- Gilts opened lower, weighed by hawkish take on Jan FOMC meeting minutes, but

then reversed losses following soft German Ifo and Surprise downward revision in

UK Q4 2017 GDP. 

- Gilts drifted lower just before lunchtime and pretty much traded sideways

until rally in USTs fed through to Gilts pushing them to intra-day highs.

- Volumes in the front-end of the Short sterling strip were huge today, with

heavy 2-way flow seen in Mar18, Jun18 and Sep18 contacts as markets adjust to a

possible higher path of UK interest rates. Gilt future rolls also picked up

today with nearly 190k traded through screens and another 155k blocked.

- Breakevens are tighter by between 1-1.7bps, swap spreads are little changed.