Gilts popped to session highs at.......>

GILT SUMMARY: Gilts popped to session highs at 1400GMT on back of rally in USTs,

but then quickly pared gains to traded close to intra-day lows as sterling

spiked to fresh post-Brexit high vs US dollar. Curve holds onto flattening move.

- 2-yr Gilt yield is -0.8bp at 0.563%, 5-yr -1.2bp at 0.862%, 10-yr -1.6bp at

1.342%, 30-yr -2.3bp at 1.842% and 50-yr -2.2bp at 1.628%.

- There appeared to be no catalyst for the sudden rise in Sterling, but markets

have been on the look out for any Brexit headlines crossing the wires.

- Earlier Gilts traded steady in upper range, supported by BoJ leaving policy on

hold and Kuroda sounding touch dovish, and strong demand at Spain 10-yr

syndication deal.

- There was little to no reaction to Gilts to UK public sector borrowing coming

in below expectations at only Stg2.6bln and on course to come under OBR forecast

for FY2017/18 of Stg49.9bln. While CBI industry trends was more upbeat than

expected with 3-month order-book balance showing strongest rally since April.

- Rally in Sterling has tightened breakeven rates with 5y & 30y 1bp narrower.

Swap spreads where little changed except for 2-yr which is 3bp tighter.