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

GILT SUMMARY: Gilts are trading modestly higher led by the 5-yr to 10-yr part of

the yield curve as US President Trump says that it could be difficult to agree a

free US/UK trade deal if PM May went along with her Brexit plan.

- 2-yr Gilt yield is -1.3bp at 0.722%, 5-yr -2.4bp at 1.004%, 10-yr -2.7bp at

1.25%, 30-yr -1.3bp at 1.707% & 50-yr -0.7bp at 1.553% according to Tradeweb.

- On a day devoid of any UK/European data and any newswire headlines, the move

higher in Gilts comes as a little surprising, volumes have been low and could be

contributing to the moves seen this morning.

- In An interview with the UK's Sun newspaper, Trump said that if the UK "do a

deal like that, we would be dealing with the EU instead of dealing with the UK,

so it would probably kill the (US/UK free) deal.

- Short sterling futures are higher, curve flatter as blue contracts rise by 3

ticks. 30-yr breakevens are 0.7bp tighter while 2-yr swap spreads are 3.2bp

wider.

- Attention turns to comments from BoE Cunliffe and then release of Fed's

semi-annual policy statement this afternoon.