Gilts are holding onto modest gains,...>

GILT SUMMARY: Gilts are holding onto modest gains, yield curve flatter as ultra

long-end outperforms the rest of the curve, underpinned by China and domestic

growth concerns and divisions within Europe.

- 2-yr Gilt yield is -2.4bp at 0.721%, 5-yr -3.2bp at 1.016%, 10-yr -4bp at

1.63%, 30-yr -4.4bp at 1.727% and 50-yr -4.4bp at 1.562%.

- Gilts opened little changed but then rose higher on the back of the Bund rally

as division within Europe on immigration and reform became more open/vocal.

Concerns over domestic retailers also added to worries for the the UK economy as

John Lewis announced a profits warning.

- The BoE Financial Stability Report highlighted global risk were elevated and

rising and that level of debt in China was a cause for concern. Carney also

warned that global interest rates were at risk of a snapback.

- There was some encouraging news on Brexit though which weighed on gilts with

Ireland's Coveney saying that draft conclusions on Brexit were 'very strong'.

- Sstg strip has ticked higher by 1 to 3 ticks with curve pretty much shifting

lower. 30-yr Breakeven is 1.4bp tighter, but swap spreads little changed.