Gilts pared losses in London...........>

GILT SUMMARY: Gilts pared losses in London afternoon session, supported by

realisation that that the hard part of negotiating UK/EU future trade deal is

going to be harder than agreeing 'sufficient progress' on exiting the EU and

that it is unlikely to be agreed by March 2019. Soft US average hourly earnings

also supported recovery in Gilts, however remain significantly lower on the day.

- 10-yr Gilt yield is 3.8bp higher at 1.288% vs high of 1.33% according to

Tradeweb, while 2s/10s is 3.1bp steeper and 10s/30s 0.7bp flatter.

- Gilts opened sharply lower as markets reacted to early morning press

conference in Brussels. While supportive comments for PM May from "Brexiteers"

from with the Cabinet allied fears of a government backlash.

- Gilt future hit session low on hope new UK/EU free trade deal could be agreed

by March 2019, however, an EU official quickly dismissed this and said there was

still a very long way to go on negotiations so Gilts pared losses. Gilts

continued to pare losses, taking cue from recovery in USTs in wake of US Data.

- Breakevens are tighter led by -2.1bp in 5-yr, while swap spreads are tighter

led by the long-end and with the exception of the 2-yr which is unchanged.