- Gilts have had a choppy session......>

GILT SUMMARY: - Gilts have had a choppy session with the curve flattening on the

day.

- The benchmark 2-year gilt has traded within a 0.834/0.849% range and the

10-year has held within a 1.597/1.614% range.

- The 2s10s spread has narrowed to 75.4bps from 76.5bps, while the 2s30s has

edged down to 109.3bps from 111.3bps.

- Short sterling futures whites/reds are down 1.0-2.0 ticks.

- We have seen substantial short sterling option flow this morning, largely in

put spreads.

- Following yesterday's positive inflation surprise, retail sales data for

August has similarly beat expectations. Retail sales ex autos came in at 3.5%

Y/Y vs 2.4% survey.

- The EU summit is taking place in Salzberg. The UK Prime Minister Theresa May

has urged the EU to evolve its position, but early signs suggest that the French

President and German Chancellor have yet to cede any significant ground.