Gilts also saw decent 2-way flow in....>

GILT SUMMARY: Gilts also saw decent 2-way flow in London afternoon session and

look set to close mixed with the yield curve steeper with short-end underpinned

by weaker than expected UK retail sales and risk of a US government partial

shutdown.

- 2-yr Gilt yield is -0.8bp at 0.573%, 5-yr unch at 0.859%, 10-yr +1.2bp at

1.341%, 30-yr +1.9bp at 1.850% & 50-yr +2.0bp at 1.631%

- Gilts, especially the the short-end had already pared opening losses before

extending gains in wake of disappointing UK retail sales. The long-end though

remained slightly weighed as markets kept eye on possible US government

shutdown.

- Markets were correct to remain cautious as US Tsys dipped as NY traders got to

their desks. Markets then saw heavy 2-way flow first rallying to session highs

on news US government may shutdown for a couple of days, only to reverse sharply

lower on likely impact.

- Long-end of swap spreads are wider by around 1.3bps, while 10-yr breakevens

are higher by 1.4bps.