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

GILT SUMMARY: Gilts are trading modestly higher, led by the long-end as time

ticks away for UK and EU to agree 'sufficient progress' on Brexit ahead of EU

leader Summit next week and UK service PMI slips more than expected.

- 2-yr Gilt yield is -1.7bp at 0.487%, 5-yr -1.9bp at 0.753%, 10-yr -2.3bp at

1.263% and 30-yr -2.1bp at 1.828% according to Tradeweb.

- Gilts opened marginally lower but very quickly reversed losses and crept

higher as markets digested ramifications of NI's DUP scuppering possible Brexit

agreement yesterday on Irish border concerns. Pressure was seen falling onto PM

May to try and get the DUP on side before the EU leaders summit on Dec 14.

- Gilt future then spiked to intraday high in reaction to UK service PMI

dropping more than expected to 53.8 in Nov from 55.6 in Oct. However faded gains

as the report showed prices charged rising at fastest pace since Feb 2008.

- The 5-yr Gilt re-opening auction was slightly disappointing as despite rise in

yield, demand dropped and the tail widened, which temporarily weighed on Gilts.

- 5-yr and 10-yr breakevens are 2.6bp and 2.2bp wider respectively, while swaps

spread are marginally wider led by the 1.1bp move higher in the 2-yr.