The Dec Gilt future hit session high...>

GILT SUMMARY: The Dec Gilt future hit session high shortly after 0900GMT this

morning and then drifted lower for the remainder of the day, weighed by some

profit taking after strong rally yesterday, surprise rise in UK service PMI and

then taking cue from fall in USTs as trader dismissed soft US payroll data.

- The yield curve has pivoted around the 10-year point with the short-end being

weighed the most with 2-yr/10-yr 3.4bp flatter and 10-yr/30-yr 0.9bp steeper,

with 10-yr yield +0.5bp at 1.266% according to Tradeweb.

- BoE Broadbent was on BBC radio 4 this morning and said that he thought rates

would need to rise 2 more times to get inflation back on track, supporting the

consensus view on the MPC, however sounded cautious on UK's economic outlook.

- Some analysts saw the markets over reacting to the BoE decision and subsequent

dovish interpretation of the MPC minutes and quarterly inflation report and see

risk that rates could rise for a second time in Q2 2018 compared to current

market pricing of Q4 2018.

- 30-yr breakevens are 2.5bp tighter while swap spreads are little changed with

exception of the 2-yr which is 7.4bp tighter at 35.5bps and close to 100-DMA.