Decent 2-way flow seen in Gilts........>

GILT SUMMARY: Decent 2-way flow seen in Gilts Tuesday in wake of UK industrial

production data, Brexit talks stalling and concerns ahead of Catalonia news

conference, but they are set to close modestly lower with the yield curve bear

flattening as the short-end underperforms.

- 2-yr Gilt yield is +2.0bp at 0.444%, 5-yr +1.8bp at 0.775%, 10-yr +0.9bp at

1.362% and 30-yr +0.1bp at 1.947% according to Tradeweb.

- Gilts opened lower, but slowly pared losses taking cue from recovery in German

Bunds. Dec Gilt future held near top of days range following mixed industrial

production, construction and trade balance data.

- The future dropped sharply though as 20-yr Gilt auction tailed badly (0.4bp vs

0.2bp), before dropping to intra-day low in wake of a 2k block G Z7 sell and

weakness seen German Bunds.

- Gilts quickly bounced of lows though taking cue from spike higher in USTs on

back of large block buy in TYZ7, likely on back of Catalonia jitters.

- Swap spreads are little changed, but 5-yr, 10-yr and 30-yr breakevens are

1.6bp, 2.7bp and 3.1bp wider respectively.