Gilts are trading mixed with yield.....>

GILT SUMMARY: Gilts are trading mixed with yield curve flatter as the short-end

looses at the expense of ultra long-end gains following soft retail sales and

40-yr Gilt supply.

- 2-yr Gilt yield is +0.1bp at 0.740%, 5-yr -0.3bp at 0.984%, 10-yr +0.2bp at

1.227%, 30-yr -1.4bp at 1.685% & 50-yr -1.9bp at 1.553% according to Tradeweb.

- Sep Gilt future opened lower weighed by overnight move in US Tsys and soft

German Bunds. Reports that the EU could extend Article 50 to avoid a no-deal

Brexit also and 40-yr Gilt re-opening auction also seen weighing.

- The future recovered though and briefly ticked into positive territory

following surprise contraction in UK retail sales for June (-0.5% m/m vs

consensus of +0.2% m/m). However, markets continue to price in circa 80% chance

of BoE raising rates in August. Future also underpinned by decent 40-yr Gilt

auction with tail coming in at 0.2bp vs 0.4bp last time.

- There was little market reaction to comments from an EU official saying that

UK's white paper on Brexit was detailed but unclear and that Article 50

extension could be possible.