Gilts have pared losses/extended.......>

GILT SUMMARY: Gilts have pared losses/extended gains in London afternoon trade

supported by reports that Germany thinks PM May's new customs plan is

"unworkable" dealing a blow ahead of key cabinet meeting tomorrow. Yield curve

has also extended its flattening move with 2s/30s now 2.4bp tighter.

- 2-yr Gilt yield is +0.2bp at 0.732%, 5-yr -0.3bp at 1.018%, 10-yr -1.5bp at

1.261%, 30-yr -1.7bp at 1.717% & 50-yr -1.5bp at 1.567%.

- Sep Gilt future opened lower as markets digested latest Brexit news and

Bloomberg ECB sources story, but then pared losses following French and Spanish

bond supply. Comments from BoE Carney then sent the future down to fresh session

lows, before recovery quickly as markets looked to put on curve flattening

trades.

- There were already concerns over PM May's fresh customs plans but news that

Germany had also rejected the plan supported renewed bid in Gilts. More risk off

flows were then seen in last hour of trade.

- White Sstg are steady to 1 tick lower, while blue are 1-2 ticks higher. 10-yr

breakevens are 1bp tighter while 5-yr & 30-yr reverse earlier widening move