The Gilt market was rally was slow.....>

GILT SUMMARY: The Gilt market was rally was slow and sure in the morning but

gather steam as US trading got underway. The spark was a soft US PPI print, then

a number of stop-losses going off in Bunds and by the close of play, the 10-Year

Gilt yield traded down to 1.08%, around a 3bp movement. 

- Open interest for the Gilt contract has been rising quite aggressively in the

past couple of weeks indicative of fresh longs being established. 

- All of the downward movement in Gilt yields was seen in the real yield space

as the 10Y index linked yield dropped 4.7bp to -1.92% and its lowest since Jun

27.

- Breakeven yields were actually rising, not helped by an oil price that was

trading at over 2 month highs. However, the rising UK breakevens was at odds

with developments elsewhere.

- Eurosterling contracts were well bid as the risk-off trade further quashed

hopes of rate hikes.