Gilts opened sharply lower and have....>

GILT SUMMARY: Gilts opened sharply lower and have pretty much stayed there since

with the Dec Gilt future contract trading in a very tight 19 ticks range with

volumes slightly below average, as markets react to FOMC decision last night

- The 10-yr part of the yield curve is seen leading the underperformance with

yield 4.5bp higher at 1.377% according to tradeweb,while 2-yr is only 1.8bp

higher and 30-year 2.4bp higher.

- There was only a marginally recovery in Gilts when latest UK public sector

borrowing numbers came in below consensus. The UK borrowed Stg5.669bln in

August, below the Stg7.3bln expected and lower than the Stg6.92bln in Aug 2016,

helped by rise in VAT receipts.

- There has not been much UK news overnight, however attention will be turning

to the cabinets Brexit meeting this morning and is expected to sign off on May's

Florence speech, which has been described as open and generous, however weather

the EU see it that way will be another matter. 

- UK breakevens have widened with 5-/yr & 10-yr around 1.5bp higher, while swap

spreads are mixed with 5-yr and 10-yr around 1bp tighter & 7-yr 2.3bp wider.