Gilts looks set to close steady to.....>

GILT SUMMARY: Gilts looks set to close steady to sharply lower with the

short-end coming under the most pressure and in-turn bear flattening the yield

curve, despite soft UK CPI data and concerns over EU sign-off of Brexit

transition deal.

- Ultra-long-end finally surrendered its gains shortly after the BoE APF

reinvestment operation in the +15-yr category, while the short-end extended it

losses with 2-yr Gilt hitting highest level since Sep 2014.

- 2-yr Gilt yield is +4.6bp at 0.873%, 5-yr +4.7bp at 1.199%, 10-yr +3.7bp at

1.481%, 30-yr +0.5bp at 1.785% and 50-yr -0.2bp at 1.558% according to Tradeweb.

- Earlier Gilts opened on the back foot, but spiked higher in initial knee-jerk

reaction Feb CPI falling to 2.7% y//y from 3.0% y/y, but quickly pared gains and

eventually squeezed lower as prospect of positive real wage growth looks set to

turn positive and the likely impact this will have on BoE monetary policy.

- Sstg put option flow pick-up after CPI release which appeared to show accounts

looking to cover risks of higher rates over next 2-/3-yrs. 5-/10-yr breakevens

are 1.3bp wider, while 2-yr swap spreads are 2.9bp tighter at 18.6bps.