Gilts have opened on the back foot.....>

GILT SUMMARY: Gilts have opened on the back foot with the short to middle part

of the curve leading the underperformance and in turn bear flattening the yield

curve, as markets continue to digest the implications of the Brexit transitional

agreement and reports that Trump might levy $60bln of import tariffs on China by

Friday. 10-yr Gilt yield is 2.1bp higher at 1.465%.

- Sterling remains supported following yesterdays news of a Brexit transitional

deal being agreed by the UK and EU and despite the Irish boarder issue still

being unresolved. While Stocks arte squeezing higher after Monday's sharp falls.

- Attention now turns to raft of UK data released over next few days, with

February inflation due at 0930GMT and then BoE monetary policy decision on

Thursday. MNI consensus is for headline CPI to drop to 2.8% y/y from 3.0% y/y in

Jan, while core is forecast to drop by only 0.1bp to 2.6% y/y.

- BoE carries out its APF reinvestment in the over 15-year category today which

could impact the ultra long-end of the curve with eye on offer-to-cover ratio.

- Breakevens are little changed but swap spreads are slightly tighter across the

curve with 2-yr 1.5bp lower at 20bps.