Having given up most of the early......>

GILT SUMMARY: Having given up most of the early gains by late morning, the gilt

rally resumed through the afternoon session.

- The Sep-20 gilt future trade at 138.22, 3 ticks off the day's high.

- Cash yields are broadly 1-3bp lower on the day with the curve bull flattening.

Current yields: 2-year -0.1159%, 5-year -0.116%, 10-year 0.1191%, 30-year

0.6247%.

- The DMO earlier sold GBP3.0bn of the 0.125% Jan-28 gilt and GBP50mn of the

1.25% Nov-32 linker. There was no further take up through the PAOF facility.

- The US decision to order the closure of the Chinese consulate in Houston over

concerns about US intellectual property protection has dominated the newsflow

today. The move is likely to spark retaliation from Beijing and marks a further

sharp deterioration in bilateral relations at a time when the global economic

recovery is both weak and highly uncertain.

- Tomorrow sees the publication of CBI Trends data for July.