Gilts suffered a blip in run up and....>

GILT SUMMARY: Gilts suffered a blip in run up and initially after US GDP data

release, but have since recovered some of those losses and look set to close in

upper range. Yield curve has sharply bull steepened as short to medium sector

outperforms following disappointing UK prelim Q1 GDP, with 2s/10s and 5s/30s 3bp

and 4.5bp wider respectively. 10-yr is -5.3bp at 1.454%.

- 1st estimate of UK Q1 GDP came in at just 0.1% q/q, well below consensus for a

0.3% q/q print and down from +0.4% q/q seen in Q4 2017, weighed by sharp

downturn in construction. ONS also played down the effect of the cold snap

saying that the fall in construction was mainly in Jan before the bad weather.

- UBS amended their call on the BoE to no rate hikes this year, will Natwest

Markets changed their view to 1 hike in August from 1 in May and a 2nd in Nov.

MNI PINCH now see only 23% chance of a hike at the next MPC meeting in May.

- Short sterling option flow dried up in the afternoon, however strip remains

flatter as white and red contracts are 5 to 7 ticks lower and green and blue 6

to 9 ticks down on the day.

- Breakevens are 1/2bp tighter, while 2-yr and 5-r swap spreads are 2bps wider.