Gilts opening modestly higher with.....>

GILT SUMMARY: Gilts opening modestly higher with the yield curve bull steepening

as the short-end is currently outperforming, supported by return of UK political

risks following confirmation that there are around 30 rebel MPS calling for UK

PM May to resign.

- Peter Chatwell of Mizuho says that we should "keep an eye on UK politics"

saying that a "Tory leadership change would threaten to break the party apart

putting the minority government at risk" an think that Labour would win a

majority if there was a snap election.

- 2-yr Gilt yield is 0.9bp lower at 0.453%, while 10-yr is 0.5bp lower at

1.379%.

- Markets also reacting to comments from BoE Ian McCafferty -- good reason to

think QE unwind could start after "several" rate hikes, which could be weighing

on the long-end of the yield curve slightly.

- Halifax prices surprised to the upside, but had little impact on rates.

Attention now turns to key US non-farm payroll and average weekly earnings data

this afternoon.