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Gilts are feeling the weight of........>

GILT SUMMARY
GILT SUMMARY: Gilts are feeling the weight of higher than expected German State
flash inflation and are trading lower across the curve, with 5-yr and 10-yr seen
leading the underperformance.
- 2-yr Gilt yield is +2.0bp at 0.258%, 5-yr +2.6bp at 0.576%, 10-yr +3.0bp at
1.228% and 3-yr +1.2bp at 1.862% according to Tradeweb.
- Gilts future actually opened a few ticks higher as GfK consumer confidence
dropped to match post-referendum low of -12 as consumers feel the pinch of
higher inflation and a deteriorating economic outlook.
- Futures then reversed gains and dropped lower, taking cue from sharp sell-off
in Bunds in wake of higher than expected German state CPI and after digesting
Chancellor Hammond comments on Brexit transition. Further selling then noted
before pan-German CPI was released, but then market witnessed short covering.
- Hammond said there was "broad acceptance" in government to strike a transition
deal to avoid a "cliff edge" scenario and should last maximum of 3-years.
- Swap spreads are mixed, short-end marginally tighter, but little changed,
while breakevens are 0.4-0.8bp wider

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