It was a slow steady start in the......>

GILT SUMMARY: It was a slow steady start in the Gilt market, despite the

volatility seen in equity markets overnight, but the larger than expected

contraction in UK industrial production and rise in trade balance deficit

supported a mild rally in Gilts and bull flattened the yield curve.

- 2-yr Gilt yield is -2.3bp at 0.660%, 5-yr -2.6bp at 1.069%, 10-yr -2.7bp at

1.589%, 30-yr -4.8bp at 1.945% and 50-yr -4.9bp at 1.716%

- Following the hawkish comments from the BoE yesterday markets attention

appears to the turning slightly more towards UK data rather than Brexit and this

morning's data was a slight disappointment.

- Industrial production fell 1.3% in December, more than the -0.9% m/m expected,

dampened by a plunge in North Sea oil production and outweighing a decent return

in manufacturing and rise in construction output. While the UK's trade gap

widened sharply in the final three months of 2017, leaving trade to exert a

sizable drag on gross domestic product in the fourth quarter.

- Surprisingly, despite the fall in Sterling, UK breakevens are tighter by

around 2bps across the curve, while swap spreads are 1-2bp wider.