Gilts open sharply lower led by the....>

GILT SUMMARY: Gilts open sharply lower led by the 10-year part of the yield

curve as markets react to overnight reports that the UK and EU have agreed the

Brexit divorce bill with newswires speculating the cost will be anywhere between

E45bln to E100bln. 10-yr Gilt yield is 5bp higher at 1.305%.

- The 'increased' offer is understood to being good enough to unlock stalled

talks ahead of key EU council summit meeting in 2-weeks time, with newswires

quoting Michel Barnier saying they "hope to have a deal at Dec summit". 

- Markets are also reacting to progress being made on US Tax bill that passed

through the senate budget committee last night.

- The front end of the short sterling strip has come under large pressure first

thing this morning with over 300k being traded in both white and red contracts,

vast majority of it selling. While MNI PINCH now sees market pricing a 60.5%

chance of another BoE rate hike in May, up from 48% seen yesterday.

- 10-yr and 30-yr swap spreads are 5.2bp and 4.5bp tighter respectively while

5-yr breakevens are 2bp tighter but 30-yr little changed.