Gilts extended gains in London.........>

GILT SUMMARY: Gilts extended gains in London afternoon session taking cue from

bid in US Treasuries despite better US housing data. Yield Curve also extended

its bull flattening move with 2s/30s set to close 2.7bp tighter at 131.2bps.

- 2-yr Gilt yield is -4.9bp at 0.650%, 5-yr -7.2bp at 1.042%, 10-yr -7.6bp at

1.570%, 30-yr -7.8bp at 1.963% and 50-yr -7.7bp at 1.749%.

- Earlier the Gilt future opened unchanged but then squeezed higher as markets

digested reappointment of Kuroda as BoJ Governor for 2nd term and comment from

Suga that they are watching the the currency markets with a greater sense of a

concern. Gilts then squeezed higher in reaction to weaker than expected UK

retail sales.

- More hard rhetoric from EU Brexit negotiator that you can't put financial

services into a free trade agreement added further weight to bid in Gilts, while

sterling dropped against both US Dollar and Euro. PM May is meeting Chancellor

Merkel to discuss Brexit, with press conference expected early evening.

- UK breakevens are steady to lower, curve flatter as 30-yr is 1.7bp tighter.

While swap spreads are wider across the board with 2-yr +2.6bps.