Hopes of Brexit negotiations moving....>

GILT SUMMARY: Hopes of Brexit negotiations moving onto transitional/trade deal

in the New Year following reports that the UK and EU have agreed on divorce bill

caused the first sharp sell-off in Gilts at start of London session. Then a

second phase of selling came at start of London afternoon session taking cue

from sell-off in USTs on likelihood US Senate might pass tax plan.

- 10-yr Gilt yield jumped 10.5bps before paring losses in last hour of trading

to close 9.6bp higher at 1.350%. 2s/10s is 4.8bp steeper and 10s/30s is 2bp

flatter.

- Prospects for Brexit talks to move onto the next stage brightened as EU

confirmed there had been an agreement on the divorce bill, clearing one of the

hurdles. While issues still remain on citizen rights and Irish boarder, there

were comments that progress is expected in next few days, in time for PM May and

EU Juncker's meeting on Monday.

- There was large selling in the front-end of short sterling strip at the open

and MNI PINCH see markets bringing forward timing of next BoE rate hike to Aug

from Nov. 10Y & 30Y swap spreads are 5.5bp tighter and 5-yr breakevens -3.2bp