Ofcourse Gilts opened weaker as the....>

GILT SUMMARY: Ofcourse Gilts opened weaker as the Korean threat eased but the

weakness was surprisingly limited, with just a 2bp rise in the 10Y yield at the

open. Soon after the open, UK CPI came in on the soft side of expectations.

According to the OIS market, the first 25bp BoE hike isn't fully discounted

until the middle of 2019 and so the potential for the market to price in a

further delay to UK rate hikes is limited. 

- Because so little in the way of rate hikes is priced, changes in short

sterling contracts was very limited. 

- The Gilt contract was also held back from rallying hard on weak economic data

and for the most part, UK Gilts were by-standers in global bond markets.

- Much more often that not, Gilt yields decline in July and August and so the

direction of least resistance is usually a rising Gilt price. However, on

Tuesday, the market appeared to be stuck down -- unable to sell-off in the

risk-on trade and unable to capitalise on weak economic data. 

- 10Y breakevens were higher at 3.019% but have shown little direction since

April. DMO data show an acceleration in IL Gilt trading volumes in 2017.