Gilts look set to close modestly.......>

GILT SUMMARY: Gilts look set to close modestly higher in light illiquid trade

with yields around 1bp lower across the board as markets wind down ahead of

Christmas next week. There was little UK or European data to direct markets so

attention was once again on latest comments from Brexit and US tax reform bill

progress.

- 2-yr Gilt yield is -1.0bp at 0.440%, 5-yr -0.7bp at 0.701%, 10-yr -1.1bp at

1.147% and 30-yr -0.9bp at 1.709% according to tradeweb.

- Gilts rallied in the morning and apart from a slight wobble just before

midday, have remained in upper range, underpinned by difference of opinion on

the next phase of Brexit negotiations as both PM May and Boris Johnson look for

a bespoke trade deal with the EU. However EU Chief negotiator Michel Barnier

said there was "no way" the UK will be able to get a bespoke deal with the EU.

- The Brexit cabinet met today, but so far there have been few leaks as to what

type of future trade relationship they would want with the EU after Brexit.

- Swap spreads have inched tighter led by the ultra long-end which is 1.2bp

narrower, while breakevens are little changed.