Gilts trading higher, yield curve......>

GILT SUMMARY: Gilts trading higher, yield curve modestly flatter in wake of

surprise rise in UK ILO unemployment rate and lower public sector borrowing

numbers. Reports that the UK might want to discuss a longer transitional period

has knocked Gilts off session highs however.

- 2-yr Gilt yield is -0.9bp at 0.669%, 5-yr -2.7bp at 1.032%, 10-yr -3.7bp at

1.548%, 30-yr -3.2bp at 1.937% and 50-yr -2.9bp at 1.729%.

- UK's unemployment rate ticked higher to 4.4% in the 3-months to December,

compared to forecasts of an unchanged rate of 4.3%, as the number of unemployed

rose for third consecutive month. Although underlying pay growth ticked higher

to 2.5% in Dec, the highest in 2017, the BoE might be worried about the cooling

in the labour market.

- Public borrowing dropped by Stg10bln in Jan bringing YTD borrowing to just

Stg37.7bln, lowest level since 2007 and well below OBR's target of Stg49.9bln.

- On the Brexit front, PM May seen under pressure following letter from 62 Tory

Euro-sceptic MPs setting out their red-lines. While the release of the UK

position on transitional negotiations might cause more problems with hardliners