The hawkish tone of the February MPC...>

GILT SUMMARY: The hawkish tone of the February MPC minutes hit the markets hard

especially the 5-yr part of the Gilt yield curve leading 5s/30s to flatten by

6.7bps and trade at tightest level since November 2008.

- 2-yr Gilt yield is +5.5bp at 0.688%, 5-yr +9bp at 1.098%, 10-yr +7.0bp at

1.621%, 30-yr +2.3bp at 1.995% and 50-yr +2.1bp at 1.765%.

- BoE MPC voted 9-0 to keep rates and QE unchanged, but the minutes took a

decisive turn to the hawkish side despite very little upward revision to growth,

with the committee unified in the belief that policy would have to be tightened

"somewhat earlier" and by a "somewhat greater degree" compared to the

expectations underpinning its November projections.

- Governor Carney tried top explain the change in the press conference saying

that it does not mean there will be more rate hikes, just that they will be

sooner, gradual and limited in nature. This did little to change markets

expectation which now price in a 77% chance of a rate hike at May's MPC meeting.

- 5-yr & 10-yr real yields have faired even worse leading breakevens to tighten

by 2.4bp and 3.4bp respectively. Swap spreads are ~3bp wider expect 5s, 7s & 10s