Gilts tried to hold onto slight........>

GILT SUMMARY: Gilts tried to hold onto slight gains in the afternoon session,

but eventually succumbed to heavy selling seen in US Treasuries, which saw 10-yr

yield trade above 3.05%, and to a slightly lessor extent German Bunds as well.

10-yr Gilt yield is 2.7bp higher at 1.506% but has still outperformed 10-yr Tsys

which is currently 5bp higher.

- The ultra-long-end though has remained anchored supported by blow out demand

for new 1.625% 2071 Gilt (Stg37bln book, Stg6bln allocated). 2s10s has steepened

by 1.1bp while 10s/50s is 2.7bp flatter.

- Rise in US Empire manufacturing and slightly better than expected US retail

sales was the catalysts for the sell-off in US Tsys and eventually UK Gilts. 

- Earlier, UK labour data showed sharp fall in productivity in Q1 as the number

of employed rose by 197k in the 3-months to March, however wage growth remained

sluggish with core rising at 2.9%. 

- Short sterling strip has steepened as blue contract fall by 2 to 3 ticks,

while there has been light buying in white contracts which are steady to 1.5

ticks higher. 5-yr and 10-yr breakevens are steady, 30-yr is 1.5bp wider.