An apparent olive branch extended by...>

GILT SUMMARY: An apparent olive branch extended by the EU`s chief Brexit

negotiator Michel Barnier pushed Gilts sharply lower, exacerbating weakness seen

earlier in the day. 

- Sep8 UK Gilts dropped 34 ticks at one point to 122.47 on comments by EU

negotiator Barnier that the bloc was `ready to propose a partnership the likes

of which has not existed before with any third country`. Future last at 122.54,

down 47 ticks on the day.

- Curve is a little steeper, with 2-Yr yields up 4bps at 0.775%, 5-Yr up 5.6bps

at 1.094%, and 10-Yr up 4.6bps at 1.498%.

- Barnier`s comments almost completely overshadowed Brexit Secretary Raab`s

comments at the House of Lords, in which he reiterated possibility of 'no deal'.

- Short Sterling futures strip bear steepening, with Green and Blue contracts

off 5-6 ticks versus 1-2 tick drop in Whites.

- Given limited UK data flow for the next few days, reaction to Barnier's

comments likely to be the focus over the next 48 hours, with Raab meeting

Barnier for talks on Friday.