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Euribor Vol Trade And Bund Calls

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GILT SUMMARY: Gilts are trading mixed, curve flattening as the front-end
underperforms despite the soft Eurozone flash inflation data, albeit in light
illiquid trade.
- 2-yr Gilt yield is +0.3bp at 0.450%, 5-yr +0.2bps at 0.774%, 10-yr +0.1bps at
1.328% and 30-yr -0.8bp at 1.899% according to Tradeweb.
- Gilts opened little changed but then squeezed higher as markets digested slip
in UK GfK consumer confidence data released overnight. While the Financial Times
reported that Hammond will not break his fiscal rules to increase public
spending and the BBC reported the BoE telling banks to prepare for "no deal" on
Brexit and thinks 75k jobs could be lost.
- Gilts pared gains however, taking cue from sell-off seen in German Bunds
despite lower than expected Eurozone CPI (1.4% y/y vs 1.5% y/y) as first
estimate of Eurozone GDP came in at 0.6% q/q higher than 0.5% q/q forecast
- 5-yr and 30-yr breakevens are around 0.7bp wider while swap spreads are little
- Attention now turns to US MNI Chicago report at 1345GMT.

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