Gilts have pared majority of their.....>

GILT SUMMARY: Gilts have pared majority of their sharp opening losses and are

now trading little changed as markets digest overnight sell-off in US

Treasuries, hawkish comments from ECB Knot and growing rift within the Tory

party. UK 10-yr yield is +0.3bp at 1.448% vs morning high of 1.469%.

- JGB's came under pressure and looked to set-off stop loss selling in TYH8

contract overnight and combined with a 20 point sell-off in the opening of the

RXH8 contract led to Gilts opening sharply lower.

- However, rise in domestic political risk has underpinned recovery in Gilts,

especially in the short and ultra long-end of the curves. Cracks within the Tory

seam to be getting wider on Brexit and there are questions over Theresa May

leadership once again. While UK is seeking the ability to vet new EU laws during

transitional phase which is set to clash with the EU and possibly delay any

agreement. While the EU withdrawal (Brexit) Bill will be discussed in the House

of Lords for 2-days starting on Tuesday which could add more pressure. 

- Little data from the UK today so attention likely on US personal income and

PCE core data at 1330GMT.