Gilts set to end Monday modestly.......>

GILT SUMMARY: Gilts set to end Monday modestly higher with the yield curve

flatter as long-end outperforms as concerns over further evidence of slowdown in

consumer spending outweighs a more stable domestic political environment.

- 10-yr Gilt yield is 2.1bp lower at 1.223%, with 2s/30s 2.7bp flatter.

- Latest data from VISA showing that consumer spending in December fell by 1%,

leading to the first contraction on a yearly basis in 5-years, further raised

concerns that negative real wage growth is beginning to bite which could lead to

a slowdown in UK growth. This appeared to outweigh the positive reaction to PM

May announcing a cabinet reshuffle, which has kept Johnson, Hammond and Davis in

their roles as Foreign Secretary, Chancellor and Brexit Secretary respectively.

- Attention though appears to be turning to Brexit once again, with markets

starting to look at possibility of transitional agreement being agreed by March

Euro Summit and then real test of trying to agree a future trade deal by Oct.

- 5-yr Breakevens have narrowed for the first time this year, albeit by only

0.4bp, while 10-yr and 30-yr are circa 1.5bp tighter. Swap spreads are wider

with 2-yr seen leading the pack at +3.1bp at 32.2bps.