Gilts squeezed higher in London........>

GILT SUMMARY: Gilts squeezed higher in London afternoon session with little seen

to spark the rally apart from soft opening in US equities and what looked to be

a buyer of 2.8k March Gilt future contracts. Yield curve is slightly flatter as

long-end outperforms.

- 2-yr Gilt yield is -0.6bp at 0.668%, 5-yr -1.7bp at 1.049%, 10-yr -2.6bp at

1.574%, 30-yr -3.2bp at 1.957% and 50-yr -3.1bp at 1.743%.

- Earlier Gilts opened lower and then extended losses reacting to overnight

losses in US Treasuries and weak start in German Bunds. There was little to no

reaction to an article in the Business insider that said the EU parliament will

allow UK "privileged" access to the single market as the UK would need to accept

jurisdiction of the ECJ. This did not stop cable temporarily trading above $1.40

- Gilts started to recover however, in wake of disappointing German ZEW data and

then following softening in UK CBI manufacturing activity that showed

expectations of output prices falling sharply from last month's 34-yr high.

- UK breakevens are mixed with 5-yr 0.5bp wider and 10-yr 0.5bp tighter, while

swap spreads are now trading marginally wider.