Gilts have fallen sharply on the.......>

GILT SUMMARY: Gilts have fallen sharply on the first trading day of 2018 wiping

out majority of last weeks gains, led by the 6.6bp move higher in the 10-year,

and not even getting on the back of a slight risk-off move.

- Curve is pivoting with 2Y-10Y 2.7bp steeper, while 10Y-30Y is 0.5bp flatter.

2-yr swap spreads are 6.1bp tighter while breakevens are 1.5bp wider.

- Gilts opened lower seen weighed by weak European bonds as market took stock of

ECB Benoit Coeure hawkish comments over the weekend, talking of not extending

its QE programme.

- Mar Gilt future than saw stop loss selling as it broke through a couple of

support levels, with three sizable block trades seeing going through as well,

which all appeared to be sells.

- Even a slightly disappointing UK manufacturing PMI release did not deter

markets from selling as overall Q4 average pointed to a rise in sentiment

compared to Q3.

- Swap flows have been muted, however there appeared to be receiving in the

belly 10Y-20Y-30Y swap fly in Stg35k DV01