Gilts have opened under modestly.......>

GILT SUMMARY: Gilts have opened under modestly lower with the yield curve bear

flattening as the short-end comes under the most pressure on the back of an

increase in the likely hood of the UK and EU agreeing a transitional deal next

week. 10-yr Gilt yield is 1.4bp higher at 1.443%.

- Overnight newswire reports had Brexit Secretary David Davis saying that the UK

could live with a transition period of under 2-years, coming more in-line with

EU's view of end of 2020. While a Times article says that the EU will allow the

UK to sign trade deals during the transition phase, after a climbdown from

Brussels.

- Looking ahead, once again there is a dearth of UK data released today, so

attention will be on any Russia retaliation to UK expelling 23 diplomats, launch

of a new 10-yr Gilt for Stg2.5bln and raft of US data this afternoon.

- Breakevens have opened a touch wider led by the 10-yr, while swap spreads are

mixed but little changed with the exception of the 2-yr which Bloomberg show as

tightening sharply by 13bps to 23.5bps.