Gilts are trading sharply lower with...>

GILT SUMMARY: Gilts are trading sharply lower with majority of the move

happening at the start of Wednesday's session and have pretty much traded

sideways since. Reports that the UK and EU have agreed the Brexit divorce bill

(no concrete numbers) which could led to talks moving onto transition/trade deal

in the new year was the main reason for the sell-off in Gilts with the 5-yr to

10-yr part of the yield curve weighed the most

- 2-yr Gilt yield is +4.8bp at 0.520%, 5-yr +6.5bp at 0.808%, 10-yr +6.3bp at

1.317% and 30-yr +4.3bp at 1.860% according to Tradeweb.

- The 'increased' Brexit bill offer, agreed by UK cabinet last week is

understood to be good enough to unlock stalled talks ahead of key EU council

summit meeting in 2-weeks time, with newswires quoting Michel Barnier saying

they "hope to have a deal at Dec summit". However there are still concerns over

the Irish boarder and the role of the ECJ on EU citizen rights. Progress on US

tax bill and upside surprise to flash German state CPI also weighed on Gilts.

- There was a large selling in the front-end of Sstg strip at the open, while

10Y swap spreads are 4.5bp tighter and 5-yr breakevens 3.2bp lower