Gilts look to close steady to lower....>

GILT SUMMARY: Gilts look to close steady to lower following a volatile afternoon

session that saw 10-yr Bund yield swing in a 5bp range. Yield curve is bear

flattening as short-end underperforms.

- Gilt market spiked into life just before 1200GMT with a sudden sell-off that

saw the future contract dropping sharply from 124.24 to intra-day low of 123.84

within the space of 20 minutes with circa 10k contracts going through screens,

aided by strong ADP numbers and optimism on US economy. Gilts made a remarkable

recovery though, taking cue from rally in USTs following soft US ISM data.

- 2-yr Gilt yield is +2.7bp at 0.488%, 5-yr +3.1bp at 0.812%, 10-yr +1.3bp at

1.347% and 30-yr +0.1bp at 1.90% according to tradeweb.

- Sources also reported heavy selling in short sterling strip from Mar18 to

Jun20 contracts in circa 70k at same time Gilts sold of sharply. According to

MNI PINCH markets are pricing in a 98% of a 25bp rate hike by BoE tomorrow,

however, focus in on size of majority and forward guidance language.

- 5-yr, 10-yr and 30-yr breakevens are 2.2bp, 1bp and 1.6bp wider respectively,

while swaps spreads are mixed but little changed.