Gilts really have not done very much...>

GILT SUMMARY: Gilts really have not done very much since opening lower despite a

good 10-yr Gilt re-opening auction and renewed concerns over the strength of PM

May's leadership following a messy cabinet reshuffle yesterday.

- 10-yr Gilt yield is 1.4bp higher at 1.25% and is the largest mover on the

curve today. 2s/10s is 0.4bp steeper while 10s/30s is 0.3bp flatter.

- Gilts opened lower taking cue from mild weakness in USTs and long-end of JGBs

overnight, while risk sentiment remained broadly positive, likely helped by

reduced geopolitical tension between N./S. Korean. Markets also digested

comments from Fed officials and looked ahead to 10-yr Gilt supply.

- Meanwhile PM Theresa May's cabinet reshuffle did not quite go to plan with a

couple of ministers resigning and one stubbornly staying in their role. While

there was further evidence of slowdown in consumer spending with non-food sales

falling 1.4% in Dec.

- There was some light buying in wake of decent 10-yr Gilt auction (tail at

0.1bp & covered 2.4x), but there was no momentum to take it higher.

- Breakevens are steady to 1bp wider/steeper and swap spreads little changed.