Gilts have taken cue from the sharp....>

GILT SUMMARY: Gilts have taken cue from the sharp sell-off in the European

Government Bond market with yields between 2.5bp and 3.0bp higher across the

curve. 10-yr Gilt yield is 3.1bp higher at 1.221% and highest since Dec 27.

- European government bonds are falling sharply as markets react to hawkish

comments from ECB's Benoit Coeure in a Caixin interview over the weekend, which

has led to gilts selling off on the first trading day of 2018.

- The sell-off in nominal Gilts has led to the widening of breakevens by around

1bps and the tightening of swaps spreads especially in the 2-yr sector which is

2.6bp tighter.

- On the data front it is a slow start to the New Year with only UK

manufacturing PMI released at 0930GMT. Consensus is for the sentiment to tick

lower to 57.9 in January from 58.2 in December.

- In terms of next Gilt supply, this is not scheduled until Jan 9 when the

benchmark 10-yr Gilt is re-opened.