Gilts are set to close modestly........>

GILT SUMMARY: Gilts are set to close modestly higher, but well off session highs

and with the yield curve bull steepening as short-end holds onto gains while the

long-end is seen weighed by 7-yr Tsy auction and large US corporate issuance.

- 2-yr Gilt yield is -3.3bp at 0.239%, 5-yr -3.6bp at 0.549%, 10-yr -2.6bp at

1.202% and 3-yr -1.1bp at 1.852% according to Tradeweb.

- Gilts opened higher thanks to a dovishly interpreted FOMC statement overnight,

but then slipped form session highs as latest CBI Distributive trades survey

found retailers reporting net sales balance at +22 up from +12 in June and were

optimistic for strong growth in August as well.

- Elsewhere, the press are highlighting possible delays in Brexit talks, with

Home Secretary Amber Rudd announcing a "detailed assessment" on the economic

impact of EU and EEA migration. While EU has warned that talks could be delayed

by 2-months because of UK's refusal to engage with Brussels over Brexit bill.

- Markets attention now seen turning towards next Thursday's BoE monetary policy

decision, MPC statement and latest quarterly inflation report.

- Short-end of Swap spreads are +2.5bp, while breakevens are 2.5-4.5bp tighter