Gilts have extended gains in quiet.....>

GILT SUMMARY: Gilts have extended gains in quiet London afternoon trade

supported by rally in US Tsys and German Bunds in wake of slightly softer than

expected US CPI data. Yield curve has pretty much shifted lower by circa 2.5bp

with the exception of the 30-yr area which has lagged the move by around 0.8bps.

- 2-yr Gilt yield is -2.1bp at 0.736%, 5-yr -2.5bp at 1.027%, 10-yr -2.4bp at

1.276%, 30-yr -1.7bp at 1.719% & 50-yr -2.6bp at 1.558% according to Tradeweb.

- Earlier Gilts opened little changed, but then edged higher following BoE

credit conditions survey that showed rise in default rates and fall in credit

availability.

- There was barely any reaction to release of UK government White paper on

Brexit as it showed little surprises but has come under criticism from a number

of business including the city of London. Although it has met a warmer reception

from some of the European leaders.

- US monthly CPI data surprising to the downside then seen as catalyst for rally

in Gilts during afternoon session. Green/Blue Sstg future contracts are 3/4

ticks higher, whites unch to +2, while 5-/10-yr breakevens are ~1.5bp tighter