Gilts are trading sharply lower with...>

GILT SUMMARY: Gilts are trading sharply lower with the 5-yr and 10-yr part of

the yield yield curve taking the brunt of the selling, following better than

expected UK 1st estimate of Q3 GDP, cementing expectations of BoE raising rates

next week. Comments from David Davis that he is hopeful of a Brexit transition

agreement in Q1 2018 also seen weighing.

- 2-yr Gilt yield is +4.1bp at 0.503%, 5-yr +4.9bp at 0.843%, 10-yr +5.0bp at

1.401% and 30-yr +3.3bp at 1.948% according to Tradeweb.

- Gilts opened a touch higher and were seen treading water before spiking lower

in knee-jerk reaction to surprise pick up in Q3 growth to 0.4% q/q from 0.3%

q/q. The 5-yr and 10-yr took the brunt of the selling with yields rising over

5bp higher and the 5-yr reaching highest level since referendum vote last year.

- The GDP figures were seen cementing the chances of a BOE rate hike next week,

with the question now being the likely size of the vote. MNI PINCH see markets

pricing in a 88.5% chance of a 25bp rate hike on Nov 2.

- A large bearish trade was bought in short sterling options, looking for faster

rise in rates next year. Swap spreads are mixed while breakevens are +1bp.