Gilts have faded earlier sharp move....>

GILT SUMMARY: Gilts have faded earlier sharp move higher, but remain supported

by risk-off bid due to rise in Italy economic/political uncertainty and comments

from BoE Governor Carney. 10-yr sector continues to outperform the rest the

curve.

- 2-yr Gilt yield is -0.9bp at 0.786%, 5-yr -1.9bp at 1.092%, 10-yr -2.3bp at

1.359%, 30-yr -0.9bp at 1.801% & 50-yr -0.1bp at 1.655% according to Tradeweb.

- Sep Gilt future opened higher and then rallied to intra-day high of 122.62

underpinned by flight-to-quality bid as BTPs came under sustained selling

pressure on increase economic/policy uncertainty and downward revision to

Eurozone service PMI.

- Comments from BoE Carney on a BBC radio 4 interview that the chances of a no

deal Brexit was uncomfortably high also supported bid in Gilts.

- Gilt future faded lower though despite UK service PMI falling more than

expected in July to 53.5 from 55.1 in June and a 3-month low.

- Short sterling strip is higher, curve modestly flatter as green/blue contracts

rally 2-3 ticks. Attention now turns to US non-farm payroll data.