Gilts have seen 2-way flow Monday......>

GILT SUMMARY: Gilts have seen 2-way flow Monday and look set to close modestly

lower, with the curve bear flattening as the short-end underperforms, albeit in

thin summer holiday trade.

- 2-yr Gilt yield is +1.0bp at 0.258%, 5-yr +0.8bp at 0.580%, 10-yr +0.2bp at

1.219% and 30-yr -0.3bp at 1.853% according to Tradeweb.

- Gilts opened higher following geo-political concerns and further signs of

division within UK government on Brexit ahead of BoE MPC meeting on Thursday.

- Gilts reversed gains following large sell of 10-yr US Tsy option calls, but

quickly recovered after newswire report from Japan of possible N.Korea getting

ready for another missile test. Month end bid also seen underpinning move.

- Gilts squeezed even higher in wake of BoE lending data that showed slight drop

in the number of mortgages approved and fall in net consumer credit, and then

traded sideways until US session.

- The buy side of the Gilt market then seemed to disappear for a couple of hours

as NY session got underway, with prices falling lower in light but consistent

selling, before later recovering in wake of soft MNI Chicago report.