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

GILT SUMMARY: Gilts are trading modestly higher led by 10-yr sector having

recovered from a mid-morning blip induced by better then expected UK

manufacturing PMI as global trade and political uncertainty supports risk-off

tone.

- 2-yr Gilt yield is -1.4bp at 0.711%, 5-yr -1.7bp at 1.01%, 10-yr -1.9bp at

1.26%, 30-yr -0.9bp at 1.728% & 50-yr -0.7bp at 1.572% according to tradeweb.

- Gilts opened higher supported by overnight concerns in global trade and the

coalition government in Germany. Worries that there will be no Brexit deal by

October, that EU is unlikely to agree to a bespoke trade deal and BoE Cunliffe

flagging risks from trade wars, emerging markets and a rising possibility of a

Chinese credit crisis, also underpinned bid in Gilts. 

- UK manufacturing PMI ticking higher to 54.4 in June from 54.3 in May led to

sudden sell-off in Gilts as markets predict economy is not contracting as some

had feared. However, Gilts recovered majority of lost ground, helped by

continued trade and political concerns.

- Sstg future contracts are 1.5 to 3 ticks higher & 5-/10-yr breakevens +1.5bps