Gilts started well, benefiting from strong....>

GILTS: Gilts started well, benefiting from strong a Treasury market in Asia that

was as much to do as a generalised weakness in the dollar than anything Treasury

related. That said, weak Japanese Q4 GDP data shook hopes of BoJ stepping back

from QQE.

- As European trading began, that overnight bond rally fizzled. Bank of England

Agents reported that wage pressures are accelerating. At the same time, a small

leg lower could be blamed on the PBOC statement that inflation may face upward

pressure.

- The 30Y Gilt is underperforming. Prospects for the long end were hurt after

yesterday's Pension Protection Fund data showed that defined benefit pension

schemes halved their deficits in January to Stg51bln. On average, DB schemes

were 96.9% funding, above the 93.9% seen at end December. The improvement mostly

came courtesy of the rise in Gilt yields, which reduced liabilities by 3.9%.

- The 2Y Gilt yield is -1.6bp at 0.685%, the 10Y is -1.5bp at 1.603% and the 30Y

is unch at 1.992%.