Gilts slip after upbeat Chinese data

LONDON, Sept 1 (Reuters) - British gilts slipped on
Wednesday after data showed Chinese manufacturing regained some
momentum in August, encouraging investors to tip-toe back into
riskier assets.

Still, the pullback was modest with Friday's U.S. payrolls
data keeping investors jittery about the health of the U.S.
economy.

By 0805 GMT, the December gilt future FLGZ0 was 21 ticks
lower at 125.05, in line with Bunds, while the yield on 10-year
gilts was two basis points higher at 3.85 percent -- still only
six basis points away from last week's record low of 2.79
percent.

Ten-year gilt yields have fallen around 140 basis points
since February as fiscal tightening in Europe and signs of a
weakening U.S. economy raised fears of a prolonged period of
economic stagnation.

A pair of Chinese manufacturing surveys showed activity
picked up last month after a government-engineered slowdown.
Indian factories stayed in top gear after Asia's third-largest
economy grew at its fastest rate in nearly three years in the
last quarter. [ID:nBMA008362]

"The Chinese data was good, suggesting that Asia hasn't
really felt the weakness of the U.S. economy," said Mohit Kumar,
gilts strategist at Deutsche Bank. "Gilts have come off a touch
but the market is very quiet."

A survey of Britain's manufacturing sector is due at 0828
GMT and is forecast to show growth cooled slightly in August.
The consensus of analysts polled by Reuters is for the headline
PMI index to ease to 57.0 from 57.3 in July. ECONGB

The state's debt management office will sell 1 billion
pounds of the 2038 gilt GBT4T38= via a mini-tender on
Wednesday, and auction 3.75 billion pounds of the September 2014
gilt GBT514= on Thursday.

* Dec gilt FLGZ0 125.05 (-0.21)

* Dec short sterling FSSZ0 99.22 (UNCH)

* 10-year yield GB10YT=RR 2.85 percent (+2 bps)

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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>
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Euro Debt [GVD/EUR] Dollar [USD/]
U.S. Treasuries [US/] Debt reports [DBT]
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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=>
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(Editing by Patrick Graham)