Gilts are currently trading modestly...>

GILT SUMMARY: Gilts are currently trading modestly lower, with the yield curve

bear flattening as the short-end underperforms in wake of better than expected

UK manufacturing PMI. Volumes are very thin though as markets wait for BoE

monetary policy decision tomorrow and a number of Eurozone countries observe All

Saints Day Holiday.

- 2-yr Gilt yield is +1.5bp at 0.476%, 5-yr +1.6bp at 0.797%, 10-yr +0.9bp at

1.343% and 30-yr +0.6bp at 1.905% according to tradeweb.

- Gilt yield curve shifted higher by around 0.5bp at the open, weighed by Brexit

talks re-starting and talk of possible compromise by UK on exit bill, retail

prices remaining at their shallowest for 4-years and the NIESR now expecting BoE

to raise rates very 6-months starting Thursday and reaching 2%.

- Dec Gilt future reversed losses however, and even hit fresh session high of

124.37 in initial reaction to upward surprise in UK mfg PMI -- 56.3 vs 56. Gilts

slipped lower though as markets digested the PMI data that showed both input and

output costs accelerating.

- Swap spreads are marginally tighter, while breakevens are slightly wider.