Gilts are trading modestly higher,.....>

GILT SUMMARY: Gilts are trading modestly higher, yield curve flattening as the

long-end outperforms despite surprise rise in Eurozone flash core CPI, as

geo-political concerns tick higher and large month-end extension underpin

demand.

- 2-yr Gilt yield is -0.8bp at 0.240%, 5-yr -0.5bp at 0.567%, 10-yr -0.9bp at

1.208% and 30-yr -1.5bp at 1.841% according to Tradeweb

- Gilts opened higher following geo-political concerns between Russia & US and

US/Japan and N.Korea. Further signs of division within UK government on Brexit

also added to political tension ahead of BoE MPC meeting on Thursday.

- Gilts reversed gains following large sell of 10-yr US Tsy option calls, but

quickly recovered after newswire report from Japan of possible N.Korea getting

ready for another missile test. Month end bid also seen underpinning move.

- Gilts squeezed even higher in wake of BoE lending data that showed slight drop

in the number of mortgages approved and fall in net consumer credit, and despite

drop in Gilt purchases by foreign investors.

- Swap spreads are slightly wider and breakevens are touch higher, but vol light