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

GILT SUMMARY: Gilts are trading modestly higher with the long-end outperforming

and in-turn flattening the yield curve taking cue from overnight move higher in

US Treasuries following comments from China's SAFE that Bloomberg story on China

slowing or even stopping purchases of USTs could of been from a 'wrong source'

or even fake news. 10-yr Gilt yield is -2.8bp at 1.258%.

- Also out last night was a survey from recruiter Morgan McKinley that showed

vacancies in London's financial district in December drop by 52% m/m the highest

in 3-years. The sharp decline is seen due to the holiday season but also the

impact of Brexit, McKinley said.

- While on Brexit, it was reported that UK Chancellor Hammond did not rule out

paying for UK banks' to be able to have access to EU financial services, saying

that "we will talk about all these things".

- Looking ahead, the DMO taps its 20-yr 1.75% Jul 2037 Gilt for Stg2.25bln this

morning which could set market tone until NY opens. The BoE release credit

conditions and bank liabilities surveys at 0930GMT, however, markets are still

more interested in Brexit.