Gilts looking to close Friday..........>

GILT SUMMARY: Gilts looking to close Friday marginally lower with the yield

curve slightly bear flattening as the short-end underperforms in wake of US

non-farm payroll and average weekly earnings data.

- 2-yr Gilt yield is +1.3bp at 0.505%, 5-yr +1.0bp at 0.763%, 10-yr +1.1bp at

1.245%, 30-yr +0.8bp at 1.790% and 50-yr +0.7bp at 1.59%.

- Gilts initially ticked to fresh session highs in first reaction to soft

non-farm payroll number, however quickly reversed lower as markets took note of

0.3% rise in average weekly earnings, up from 0.1% in November and rising hope

that low unemployment is finally forcing wages higher. 

- The largest move in London has been in 5-yr breakevens which has risen by

2.8bp to 2.983%. This could be due to the 10% rise in oil since mid-Dec and

underlying cost pressures seen in latest PMI data. However both 10-yr and 30-yr

breakevens are 1.0bp and 2.2bp tighter respectively.

- Swap spreads are trading wider led by 2.2bp rise in 30-yr, with the exception

of the 2-yr which has tightened 3.5bp to 29.6bps.