Having pared around half of weak.......>

GILT SUMMARY: Having pared around half of weak inflation induced gains just

before midday, Gilts traded sideways in a narrow range in the afternoon,

ignoring more wider moves in German Bunds and US Treasuries. Yield curve has

bull steepened as short-end remains underpinned by weak CPI print.

- 2-yr Gilt yield is -4.4bp at 0.849%, 5-yr -4.3bp at 1.142%, 10-yr -3.0bp at

1.416%, 30-yr -0.7bp at 1.82% and 50-yr -1.2bp at 1.63% according to Tradeweb.

- 2-yr Gilt yield hit low of 0.806% in reaction to UK CPI falling to 2.5% y/y

from 2.7%, while core fell by 0.1% to 2.3% y/y. PPI data was a little more

in-line though still showing input and out prices rising steadily.

- Gilts then pared around half of those gains over next 2-hrs or so, as markets

expect the BoE to remain focused on the continued low unemployment level and

first signs of a rise in wage growth and still hike rates in May. 

- 5-yr breakevens have given back around half of its tightening move as well and

is now 2.7bp tighter, while 10's is now down only 0.7bps vs 4bp earlier. Swaps

spreads are circa 1bp wider.

- Tomorrow sees March retail sales and tap of 10-yr Gilt for Stg2.5bln.