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Higher than expected UK August.........>

GILT SUMMARY: Higher than expected UK August inflation and continuation of
slight risk-on sentiment has led the Gilt market to sell-off sharply Tuesday
with the 10-year part of the yield curve seen leading the underperformance.
- 2-yr Gilt yield is +2.5bp at 0.239%, 5-yr +2.9bp at 0.499%, 10-yr +3.6bp at
1.077% and 30-yr +3.0bp at 1.727% according to Tradeweb.
- Gilts opened lower with yields around 1.8bp higher across the curve as markets
continued to trade with risk-on sentiment as UN unanimously agreed to impose new
sanctions on N.Korea and the Repeal Bill passed 2nd reading in House of Commons.
- Dec Gilts took another leg lower just ahead of UK Aug CPI release, with
traders noting a block sell of 1.5k future contracts at 127.00.
- Gilt future contract then spiked to session low of 126.81 in reaction to UK
CPI rising to 2.9% y/y, way above MNI median forecast for a 1bp rise to 2.7%
y/y, before some profit taking saw the contract pare losses.
- Swap flows have been light so far Tuesday, however 2-yr swap spreads are 2bp
wider, while there has been a mixed response in UK beakevens with 5-yr 0.8bp
wider, but 10-yr is little changed and 30-yr 0.4bp tighter.

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