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

GILT SUMMARY: Gilts are trading modestly higher ahead of NY open with the yield

curve flatter as markets trade with a mild flight-to-quality bid following rise

in geo-political tension between N.Korea and S.Korea/US and renewed concerns in

Italy.

- 2-yr Gilt yield is -0.4bp at 0.832%, 5-yr -0.8bp at 1.194%, 10-yr -1.3bp at

1.501%, 30-yr -2.4bp at 1.892% and 50-yr -3.4bp at 1.674% according to Tradeweb.

- N.Korea cancelled a meeting with S.Korea and then threatened cancelling its

summit with the US if the later continued to insist on nuclear demands. While in

Italy concerns over possible M5S and Lega govt plans on debt and EMU membership

sent BTPS sharply lower and supported flight-to-quality bid in core European

bonds and Gilts.

- Market sources have reported decent buying in Dec8 short sterling and there

has been buying of call options as well, all looking for BoE rates to remain on

hold. 

- BoE Broadbent made noises this morning about how the UK will still likely

generate inflation despite less output and income growth