Gilts sold off sharply in the..........>

GILT SUMMARY: Gilts sold off sharply in the afternoon with the yield curve

steepening, adding to the already lower move seen in the morning session,

pushing 10-yr Gilt yield above 50-DMA level and highest since Aug 9.

- 2-yr Gilt yield is +6.0bp at 0.274%, 5-yr +7.8bp at 0.547%, 10-yr +8.5bp at

1.126% and 30-yr +8.4bp at 1.781% according to Tradeweb.

- Gilts were already trading lower on the back of higher CPI data, when a very

disappointing BoE APF operation led to a sharp sell-off in the ultra-long end,

which dragged the rest of the yield curve lower, including short sterling. The

BoE purchased just 1 out of the 17 gilts on offer (3.50% 2068) and at a price

18-cents below mid-market level. The cover ratio also increased highlighting a

desire by Gilt holders to sell stock.

- Earlier Gilts opened on the back foot due to continued risk-on sentiment and

as markets looked ahead to UK CPI data. Block sell in Dec Gilts also weighed.

- Gilts took another leg lower as CPI rose to 2.9% y/y from 2.6% y/y more than

expected, which is seen putting pressure on the BoE MPC at this weeks meeting.

- 5-yr Breakevens are 1.2bp wider, however swap spreads are little changed.