Gilts are trading sharply higher due...>

GILT SUMMARY: Gilts are trading sharply higher due to risk-off sentiment, but

are off session best levels, as strangely, a technically uncovered German Schatz

auction weighs heavily on the Gilt market.

- The curve has pivoted around the 10-yr area with yield on the 10-yr Gilt

-4.8bp at 1.06%, while 2s/10s spread is 3.5bp flatter and 10/30s 1.2bp steeper.

- Gilts opened sharply higher as markets played catch up following August Bank

Holiday and in reaction to overnight news of N.Korea firing a missile over

Japan, which led to risk-off flows.

- Markets also digesting the start of third round of Brexit negotiations in

Brussels, which have got off to a rather tense start with EU's Barnier warning

the UK that it needed to start negotiating "seriously". While UK's Davies called

on the EU to "show flexibility and imagination".

- EU's Juncker then weighed in saying won't enter new relation talks until

divorce resolved.

- Majority of Swap spreads are trading marginally wider. While Breakevens are

tighter with 10-year and 30-year in the region of 1bp tighter.