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

GILT SUMMARY: Gilts are trading modestly higher into NY open Wednesday supported

by risk-off sentiment on Catalonia concerns, however are off session best levels

following higher than expected UK service PMI. The 10-year part of the yield

curve is seen leading the move higher.

- 2-yr Gilt yield is -0.9bp at 0.441%, 5-yr -1.2bp at 0.772%, 10-yr -1.6bp at

1.344% and 30-yr -1.1bp at 1.905% according to Tradeweb.

- Gilts opened strongly on the back of more higher in US Treasuries following

dovish reaction to newswire reports of a short list for the Fed Chair position

being handed to US President Trump, which did not included Yellen. Continued

tension in Catalonia also provided bid in Gilts.

- Gilts faded gains on light thin trade ahead of UK service PMI and then ticked

into negative territory when the number surprised to the upside. However dip

buying and recovery in German Bunds following decent 10-yr auction helped Gilts

recover about half its earlier gains.

- Swap spreads are tighter except for the 2-yr, while breakevens are around

1.0bp wider