Markets seen a little on edge ahead....>

GILT SUMMARY: Markets seen a little on edge ahead of key US non-farm payroll and

average weekly earnings data, with the Dec Gilt future initially opening

slightly higher, but then spiking lower in modest selling, only to then recover

in wake of fall in second quarter unit labour costs (ULC). Yield curve is

modestly steeper as short-end outperforms on continued UK political risks.

- 2-yr Gilt yield is -0.7bp at 0.455%, 5-yr +0.3bp at 0.797%, 10-yr +0.5bp at

1.389% and 30-yr +0.6bp at 1.972% according to Tradeweb.

- The short end of the yield curve rallied in the morning supported by return of

UK political risks following confirmation that there are around 30 rebel MPS

calling for UK PM May to resign. The long-end though was seen weighed by

comments from BoE Ian McCafferty -- good reason to think QE unwind could start

after "several" rate hikes,

- Surprise jump in house prices seemed to be catalyst for a sell-off in Gilts,

which then followed Bunds sharply lower as stops got triggered. Gilts recovered,

likely on the back of ULC falling to 1.6% in Q2 from 2.4%.

- Breakevens are circa 2bp wider, while swap spreads are little changed