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Bear Flattening In Early Asia Trade




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GILT SUMMARY: Gilts have come under heavy selling pressure so far Wednesday, led
by the 10-yr part of the yield curve as UK construction PMI rebounds in April,
and markets shrug off renewed Brexit concerns.
- 2-yr Gilt yield is +3.9bp at 0.817%, 5-yr +4.4bp at 1.151%, 10-yr +5.8bp at
1.463%, 30-yr +4.4bp at 1.864% and 50-yr +3.9bp at 1.665% according to TradeWeb.
- June gilt future dipped lower in reaction UK construction PMI rising to 52.5
in April from 47.0 in March and sharply above consensus of 50.5. A Gilt future
block of 1.5k @ 122.17 likely weighed as well. Gilts then came further selling
pressure while the pound ticked higher against the Euro and Dollar, with little
seen to trigger the move and despite growing pressure on Tory government to
decide its Brexit position.
- The special Brexit cabinet meets today to discuss the 2 preferred custom
options that are on the table. A group of Tory Brexiteers though have delivered
an "ultimatum" demanding that PM May drop one of them, a 'customs partnership',
as it would mean the UK would not be able to agree new trade deals.
- 2-yr swap spreads are 3bp tighter while breakevens are slightly wider

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