Gilts look set to close Thursday.......>

GILT SUMMARY: Gilts look set to close Thursday modestly higher, yield curve

flatter as long/ultra long-end outperforms the short-end, reversing earlier

higher than expected rise in UK retail sales induced losses in wake of ECB

monetary policy decision.

- 2-yr Gilt yield is -0.5bp at 0.731%, 5-yr -1.2bp at 1.061%, 10-yr -2.5bp at

1.335%, 30-yr -4.1bp at 1.76% & 50-yr -5bp at 1.569% according to Tradeweb

- Sep Gilt opened lower, then extended losses as retail sales jumped 1.3% in May

thanks to warm weather and Royal wedding, but bounced off lows as move looked

overdone and markets priced in likely pay-back in sales next month.

- Gilts then rode on the back of the sharp move higher in German Bunds in wake

of ECB decision to cur QE to E15bln  after Sep and end it in Dec but was

dependant on data, and added rates would not rise until at least after the

summer of 2019 if growth/CPI moved in-line with forecasts.

- The ECB decision helped Short sterling strip to recover earlier losses and now

trades slightly flatter as blue contracts rise by 1 tick, whites unchanged.

Breakevens are circa 1bp tighter, but long-end swap spreads are 2bp wider