Gilts rangebound ahead of BoE, supply in focus

* Ranges seen holding ahead of Thursday's BoE decision

* Auction of 2-year gilts draws strongest cover in 8 yrs

* Services PMI, auction of 2018 gilts due on Weds

LONDON, Feb 2 (Reuters) - British government bonds shuttled
in a narrow range on Tuesday, showing little reaction to the
best conventional gilt auction in eight years as investors sat
tight ahead of the Bank of England's monetary policy decision.

The central bank is widely expected to call a halt to its
unprecedented 200 billion pound quantitative easing scheme on
Thursday and traders said the market was likely to trade in
familiar ranges until then.

"There's a lot of event risk ahead of the BoE's decision on
Thursday and there's not much appetite to take big positions,"
said Sean Maloney, fixed income strategist at Nomura.

The March gilt future FLGH0 settled 13 ticks lower at
115.70, broadly in line with the equivalent Bund. In the cash
market, the yield on 10-year gilts was two basis points higher
at 3.91 percent, widening the spread against Bunds by one basis
point to 72 bps.

The BoE is expected to leave interest rates unchanged at 0.5
percent and to announce no expansion of its 200 billion pound
quantitative easing programme, effectively calling time on its
massive gilt-buying spree. [ID:nLDE6101W4]

Tuesday's auction of 2012 gilts drew strong demand, with
investors putting in bids for more than three times the 3.75
billion pounds of gilts on offer -- the highest cover in a
conventional auction since March 2002. [ID:nLDE6111JY]

"It's good for the market to get a post-QE auction under its
belt and for it to go relatively well and be solidly received by
the market," said Moyeen Islam, strategist at Barclays Capital.

"For all the naysaysers on the gilt side, it seems to have
held in relatively well."

On Wednesday, Britain's Debt Management Office returns to
the market to sell 3 billion pounds of a 5 percent conventional
gilt due 2018.

The auction will follow the closely-watched CIPS/Markit
services sector survey at 0928 GMT.

"Today's auction went well but it could be there may be some
nerves creeping in ahead of tomorrow," said Nomura's Maloney.

* Mar gilt FLGH0 115.70 (-0.13)

* Mar short sterling FSSH0 99.36 (UNCH)

* Jun short sterling FSSM0 99.20 (UNCH)

* 10-year yield 3.91 percent (+2 bps)
--------------------- KEY MARKET DATA---------------------------
Long Gilt futures <0#FLG:> Gilt benchmark chain <0#GBBMK=>
Short Stg futures <0#FSS:> Cash market quotes <GB/GILT1>
Deposit rates DM= Sterling cross rates GBPX1=
UK debt speedguide <GB/DEBT> Econ. indicator polls<ECI/GB>
--------------------KEY MARKET REPORTS--------------------------
Gilts [GB/] Sterling [GBP/]
Euro Debt [GVD/EUR] Dollar [USD/]
U.S. Treasuries [US/] Debt reports [DBT]
-------------------- GILT STRIPS DATA --------------------------
Gilt strips data <GB/STRIPS1> All gilt strips <0#GBSTRIP=>
Gilt strips IO <0#GBSTRIPIO=> Gilt strips PO <0#GBSTRIPPO=>
A list of all the strippable British gilts <0#GBSTRIPTSY=>
--------------------- FOR MORE NEWS ----------------------------
Top British news [TOP/UK] World news [GLANCE/G]
UK diary [GB/DIARY] Press reviews [PRESS]
New from Reuters [INFO]
Useful Speedguides REUTERS <PHONE/HELP> <USER/HELP>