Long-end of the Gilt yield curve.......>

GILT SUMMARY: Long-end of the Gilt yield curve extended gains and the short-end

reversed mild losses in reaction to BoE monetary policy announcement, as markets

took a dovish view on the minutes that show BoE in no rush to rise interest

rates. 10-yr Gilt yield is hovering around 200-DMA at 1.176%, 3.7bp lower on the

day.

- 5-yr part of the yield curve is seen lagging while ultra long-end outperforms,

leading to 5s/30s being 2.6bp flatter at 101.8bps.

- Gilt markets were pretty much treading water before the BoE policy

announcement, but the short-end did come under early pressure from larger than

expected rise in UK retail sales for November, helped by Black Friday sales.

- BoE left rates and QE unchanged at 0.50% and Stg435bln as widely expected,

however markets saw some dovish undertones in the minutes and the Gilt future

rallied 35 within half-an-hour of the release and markets pared back chances of

a rate hike in H1 2018.

- 5-yr and 10-yr breakevens are 1.5bp tighter, but 30-yrs are unchanged. While

majority of swap spreads are 1.5bp wider, except for 2-yr which is 0.5bp tighter