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

GILT SUMMARY: Gilts are trading modestly higher having reversed earlier opening

weakness, albeit in light trade with Dec gilt future volume down 40%.

- 2-yr Gilt yield is +0.02bp at 0.437%, 5-yr unch at 0.753%, 10-yr -0.08bp at

1.326% and 30-yr -1.0bp at 1.896% according to Tradeweb.

- Gilts opened lower, with the curve shifting around 1.5bp higher as markets

faded yesterday afternoons flight-to-quality bid. While some hope of progress at

the Brexit talks in Brussels was also seen weighing, with talk of more "concrete

proposals being offered by the UK.

- There could be more clarification from London as well as Prime Minster Theresa

May meets with European Council President Donald Tusk later today.

- There was no market reaction to slightly higher than expected rise in UK

mortgage approvals as Net consumer credit, a measure of unsecured borrowing, saw

slower growth in August, rising Stg83mln after Stg192mln rise in July.

- 5-yr & 10-yr breakevens are 1bp wider, while swap spreads are little changed.

- With only US new home sales and Richmond Fed mfg index released later,

attention turns to Fed Chair Yellen comments just after European markets close.