Gilts reversed gains and squeezed......>

GILT SUMMARY: Gilts reversed gains and squeezed lower, while cable spiked higher

in run up to London session close as markets reacted to comments from PM May

that the UK and EU are close to an agreement on Brexit transition. Yield curve

is now steepening slightly.

- 2-yr Gilt yield is +0.9bp at 0.789%, 5-yr -0.3bp at 1.136%, 10-yr -0.4bp at

1.478%, 30-yr +1.2bp at 1.893% and 50-yr +1.3bp 1.675%.

- Earlier Gilts opened higher supported by risk-off sentiment following

inconclusive Italian election which saw anti-establishment parties do well and

tick higher in risk of a trade war in wake of comment from US Trump on car

taxes.

- Gilts pared gains though, taking cue from fall in German Bunds as risk-off

move looked over done and equites recovered lost ground. UK Service PMI coming

rising to 54.5 in Feb from 53.0 in Jan and highest level in 4-months pushed

gilts lower and indicates UK GDP growing at just under 0.4% in Q1.

- Breakevens 0.5-1.0bp wider curve flatter, while swap spreads are wider across

the board led by +2.2bp in the 2-yr