Gilts suffered a down day today,.......>

GILT SUMMARY: Gilts suffered a down day today, with yields rising from the

get-go weighed by relative period of calm in UK politics, 5-yr Gilt supply,

sharp sell-off in German Bunds and higher oil prices. The 10-yr part of the

yield curve has underperformed with 2s/10s 1.3bp steeper and 10s/30s 1.1bp

flatter.

- 2yr gilt yield is +3.2bp at 0.476%, 5-yr +4.8bp at 0.733%, 10-yr +5.7bp at

1.269% and 30-yr +4.8bp at 1.836% according to Tradeweb.

- Gilts opened on the back foot as resignation of Priti Patel seemed to calm

political jitters and markets took cue from softer US Treasuries overnight.

- Sharp selling then seen just before 1100GMT on the back of weakness seen in

German Bunds as EC raised growth forecasts for a number of EMU countries. Large

block sell in RXZ7 then added to downside move before NY traders came in and

steadied the ship. Spike higher in oil on Mid-east tension and talk of TPP

countries agree principle trade deal then weighed late on.

- 10-yr breakevens are 2.2bp wider on higher CPI expectations, while swap

spreads are circa 1.5bp tighter with exception of 2-yr which is 1.1bp wider.