Gilts largely shook off the............>

GILT SUMMARY: Gilts largely shook off the negativity evident in other European

debt markets. Going into the close, the 10Y Bund yield was 3bp higher but the

10Y Gilt yield rose just 1.2bp to 1.184% and helped the Bund-Gilt spread hit a

new 3 month low of 77bp.

- The rise in Gilt yields was almost exclusively in the real yield space as

breakeven inflation rates saw next to zero movement over the course of the

session.

- GBP swap flow was actually quite perky, with most activity in the 10 and 30Y

tenors. There was even a 5-10-30Y fly in which it is likely that the 10Y was

paid.

- The 30Y section of the curve was the best bid over the course of the day and

on the cash curve, the 7-10Y curve was well offered all day.

- November loans for house purchase declined to the lowest level in 15 months

but Gilts did not react.

- On Friday, we regret to inform that there are no early market closes and there

is a smallish 0.01Y month-end extension according to Bloomberg-Barclays.