Gilts set to close sharply lower,......>

GILT SUMMARY: Gilts set to close sharply lower, curve bear steepening as markets

pare back Tuesday's risk-off move as geo-political tension ease and US Q2 GDP is

revised higher than expected.

- 2-yr Gilt yield is +1.9bp at 0.180%, 5-yr 2.3bp at 0.444%, 10-yr +4.0bp at

1.036% and 30-yr +4.2bp at 1.704% according to Tradeweb.

- Gilts opened lower weighed by fall in tension over missile test by N.Korea &

fade in risk-off sentiment. Easing in UK high street deflation in August, with

non-food deflation at its shallowest since April 2013, also weighed on Gilts.

- There was no reaction to BoE lending data that showed a higher than expected

increase in mortgage approvals but a slow down in unsecured credit in July.

- Gilts squeezed higher though, as newswires reported UK PM May reiterating "no

Brexit deal is better than a bad deal". But then drifted lower as NY trading got

underway and eventually hit day lows following better than expected upward

revision to US Q2 GDP. Gilts then remained in lower bound range.

- UK swap spreads are marginally tighter, while UK breakevens are between 0.5bp

to 1.0bp wider.