Gilts opening lower, continuing to.....>

GILT SUMMARY: Gilts opening lower, continuing to be weighed by the step-up in

Bank of England hawkish rhetoric Thursday, with some banks now seen calling for

a 25bp rate hike at the next MPC meeting in November.

- The short-end is marginally underperforming, bear flattening the yield curve

as Citi recommends a 2s/10s flattening trade seeing possible policy error by the

BoE. 2-yr yield is +2.3bp, while 30-yr is +1.8bp.

- The main comment that has got the market all fired up was that the "majority

of MPC members felt some withdrawal of stimulus would be appropriate in the

"coming months" if data came in as expected. The view is that this step-up in

rhetoric was to get the markets to shift expectations and the BoE's credibility

would take a huge knock if it did not follow through and therefore a November

rate hike is a large probability. Comments from BoE Governor Carney that he was

one of the "majority" also supported likelihood of rates rising.

- Looking ahead the expectations of a hike in a few months could turn up a notch

if comments from BoE Gertjan Vlieghe, a known dove, turn more hawkish and if he

was one of the 'majority' in calling for rate hike in coming months.