Gilt yield curve has steepened.........>

GILT SUMMARY: Gilt yield curve has steepened sharply Tuesday taking cue from

moves in US Treasuries and German Bunds, with the yield on the 10-yr Gilt

looking to close around 1.25% level, 6bp higher on the day. 5s/30s is 3.3bp

wider at 103.7bps compared to yesterdays fresh 9-year low of 100.2bps.

- 2-yr Gilt yield is +2.0bp at 0.462%, 5-yr +4.0bp at 0.743% and 30-yr +7.4bp at

1.783% according to Tradeweb.

- Due to a dearth of UK data and markets waiting for next phase of Brexit

negotiations to start in the New year, markets looked to Europe and US for

direction. Soft opening in German Bunds and overnight steepening in US yield

curve led to Gilts opening lower/steeper.

- Gilts extended steepening move during the morning session, taking cue from

sell-off in long-end of Core EGBs before falling sharply as NY markets opened on

talk of curve steepening trades going through. Thin pre-Christmas markets was

also adding to the volatility .

- Swap spreads are marginally tighter led by 2.2bp fall in the 2-yr, while 10-yr

and 30-yr breakevens are 1bp and 1.5bp wider respectively, but 5s unchanged.