Gilts looks set to close modestly......>

GILT SUMMARY: Gilts looks set to close modestly lower weighed by earlier risk-on

sentiment flows as Italian BTPs experience a light relief rally. Curve wise, the

5-yr to 10-yr part of the yield curve continues to underperform the short and

ultra long-end.

- 2-yr Gilt yield is +2.4bp at 0.831%, 5-yr +3.0bp at 1.196%, 10-yr +2.8bp at

1.515%, 30-yr +1.9bp at 1.92% and 50-yr +2.2bp at 1.718% according to Tradeweb.

- Gilts fell at start of London session, weighed by risk-on sentiment as BTPs

saw a light relief rally and some market positioning ahead of UK public sector

borrowing numbers and comments from BoE MPC members. Gilts squeezed off session

lows as April borrowing was lower than expected and there was a Stg2.1bln cut in

FY2016/17 borrowing.

- BoE carney said that the majority of the MPC is opposed to publishing a rate

forecast, but Vlieghe came out in favour of it. The overall message from the

no-change camp was that they could wait and see on data before deciding to hike

rates again. Sstg strip is steady to 4 ticks lower, curve touch steeper. While

breakevens have widened by ~2.0bps and swap spreads ~1bp tighter.