Gilts are trading sharply higher.......>

GILT SUMMARY: Gilts are trading sharply higher despite sudden sell-off

mid-morning with the yield curve pivoting around the 10-yr as markets react to

increased political instability in Italy.

- 2-yr Gilt yield is 4.8bp lower at 0.647%, 5-yr -8.1bp at 0.954%, 10-yr -11.1bp

at 1.213%, 30-yr -7.6bp at 1.694% & 50-yr -7.5bp at 1.504% according to

Tradeweb.

- 10-yr Gilt yield dropped to a low of 1.103%, the lowest since September 2017,

at the height of the bloodbath seen in Italian BTPs with markets drawing

comparisons to the euro finance crisis back in 2011/2012. At one point 2-yr BTP

yield had blown out to a high of 2.826% before stabilising by 33bps.

- There was a sudden sharp sell-off shortly after 0930BST with markets left

scratching heads as to the trigger, but it looks like market had moved too far

too fast.

- Short sterling strip has bull flattened with green and blue contracts rising

by 10 to 11 ticks compared to a steady to 4 tick move higher in white contracts.

Long-term downtrends have broken, suggesting more dovish rate expectations.