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A combination of risk-on sentiment.....>

GILT SUMMARY: A combination of risk-on sentiment flows, continued mantra of
gradual rate hikes from the FOMC and better than expected UK service PMI has led
Gilts to sell-off sharply especially in the 2-yr to 10-yr area bear flattening
the curve.
- 2-yr Gilt yield is +3.4bp at 0.502%, 5-yr +3.0bp at 0.765%, 10-yr +3.2bp at
1.245%, 30-yr +2.1bp at 1.789% and 50-yr +1.7bp at 1.591%.
- Gilts were lower from the get-go, weighed by risk-on flows overnight as Asian
stocks rallied and oil continued to tick higher. While FOMC meeting minutes
showed Fed was still on a path of gradual rate hikes.
- March Gilt future then spiked to session low of 124.50, probably on the back
of a sell block in G H8 at 124.55 for 1.5k, before recovering by 15 ticks.
- There was further selling in wake of higher than expected rise in UK service
PMI to 54.2 in Dec from 53.8 in Nov. Overall, the PMI data pointed to a marginal
uptick in the economy with avg composite PMI for Q4 above Q3.
- Breakevens are between 1.3-2.6bp wider led by the 5-yr, while swap spreads are
mixed with 2-yr 1.9bp tighter and 15-yr and above modestly wider.

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