Gilts look set to close mixed..........>

GILT SUMMARY: Gilts look set to close mixed following sell-off in the long and

ultra-long end of the curve during London afternoon session. It appeared the

weaker than expected pan-German flash HICP led to that part of the curve being

weighed while short-end held onto gains, steepening the curve.

- 2-yr Gilt yield is -1.4bp at 0.605%, 5-yr -1.1bp at 0.968%, 10-yr +0.8bp at

1.461%, 30-yr +1.6bp at 1.905% and 50-yr +2.5bp at 1.696%.

- Growing domestic political uncertainty, possible delays in agreeing a Brexit

transitional deal and forecasts of a negative impact on growth following Brexit

all underpinned a higher move in Gilts this morning.

- German flash HICP coming in at 1.4% y/y below forecasts for 1.6% y/y seamed

the precursor for faded in 10-yr maturity and above in Gilts.

- Mortgage approvals in the UK dropped sharply in December according to latest

data from the Bank of England, however, had little impact on markets.

- 5-yr breakevens have tightened sharply in the afternoon, while 10-yr and 30-yr

remain a touch wider. Swap spreads are marginally wider apart from short-end.